Canada's core inflation rate accelerated more than expected in September, reaching the highest level in more than three years and prompting speculation the country's central bank may begin raising interest rates sooner than expected.
Consumer prices overall rose by 3.3% in September from the same month a year earlier, led by higher prices for gasoline and food, Statistics Canada said Friday. That's up from an annual inflation rate of 3.1% in August.
However, the core inflation rate -- stripping out volatile items such as food and energy -- was 2.2% on an annual basis, up from 1.9% in August. It's the first time the core rate has risen above 2% since February 2010.
The September core reading is also the largest year-over-year gain since December 2008, with higher costs for vehicles, clothing and insurance premiums contributing to the jump in the rate.
Economists had expected an overall annual rate of 3.1% in September and a core rate of 2%.
Statistics Canada said energy prices rose 12.5% during the 12 months to September, compared to a 13.4% annual rate in August.
"On a year-over-year basis, gasoline prices rose 22.7%, after gaining 22.8% in August," it said. "Prices for fuel oil rose 27.4%, while prices for natural gas fell 4.7%."
Food prices were up 4.3% in September from a year earlier, following a 4.4 per cent rate in August.
The Bank of Canada aims for an annual inflation rate of 2%, the midway point of its 1-3% target range.
The bank monitors both overall inflation and the core rate, which it believes is a more accurate measure of underlying trends and provides a better outlook on future price changes.
The Bank of Canada has kept its key interest rate at a near-record low of 1% for more than a year to encourage spending by consumers and businesses amid a weaker-than-expected economic recovery from the 2008-09 recession.
Many economists do not expect the central bank to begin raising its rate until the second half of 2012.
