Canada’s inflation rate hit a three-decade high in January, putting additional pressure on the Bank of Canada to start raising interest rates as early as its next meeting on March 2.
The annual inflation rate reached 5.1% in January, up from 4.8% in December, Statistics Canada reported. That’s the highest level that consumer prices have been since 1991.
The average of the central bank’s core measures -- often seen as a better indicator of underlying price pressures -- rose to 3.2%, also the highest rate since 1991.
The report will reinforce expectations that policymakers, led by Bank of Canada Governor Tiff Macklem, will start to raise interest rates at the next policy meeting in March. Markets are pricing in as many as seven rate increases over the next 12 months.
The Bank of Canada has held its benchmark interest rate at the emergency level of 0.25% since March 2020, soon after the COVID-19 pandemic hit North America.
Inflation has now exceeded the central bank’s 1% to 3% control range for 10 straight months as global supply chain bottlenecks and labor shortages push up prices. Since Canada introduced inflation targeting in the early 1990s, the inflation rate has averaged about 1.8%.
On a monthly basis, prices rose 0.9% in January, driven by a recovery in gasoline prices last month and higher costs for cars. Year-over-year, gasoline and housing costs have been the biggest drivers of higher inflation.
On a seasonally adjusted basis, consumer prices were up 0.6% in January -- a historically strong pace of increases that suggests momentum remains elevated for inflation.
