Canada’s annual rate of inflation rose to 1.9% in January, mainly due to rising gasoline prices, Statistics Canada said Thursday.
Economists had expected annual inflation of 1.8% during the month after December’s pace of 1.3%.
"Gasoline prices exerted upward pressure on the [Consumer Price Index] for the third consecutive month, as a result of price volatility in the second half of 2008 and the first half of 2009," the federal agency said.
In January, gasoline prices were 23.9% higher than they were in January 2009, following a 25.6% rise in December 2009. Excluding energy, the CPI rose 1.3% in January, compared with a 0.8% increase in December.
Statistics Canada also vehicle prices exerted upward pressure on the inflation rate in January, a turnaround after being a significant source of downward pressure for an extended period.
Consumer prices were up in all provinces and in six of the eight categories of goods —only shelter and clothing prices were lower.
The annual core inflation rate -- which strips out volatile items such as energy products and certain food products -- was up 2%, compared with 1.5% in December. Economists had expected a 1.9% rise in January.
Although the annual rate was slightly above expectations, economist at BMOCapital Markets Benjamin Reitzes said in a note that he expects "inflation to slow over the next two months," and does not expect the Bank of Canada to hike interest rates early.
"Indeed, the Bank of Canada’s latest forecast for 1.6% [annual] core inflation in the first quarter is still attainable despite the hotter figure. The inflation story remains the same, with a strong Canadian dollar and significant spare capacity helping keep both headline and core inflation in check, which should allow the Bank to hold to its commitment to keep [interest] rates steady until the end of June."
