Core Inflation Holds Steady
February 19, 2020
Focus Area—Canadian Economics
The Conference Board of Canada’s Economist Anna Feng offers the following insights on today's Consumer Price Index data:
“Inflation soared to 2.4 per cent in January, driven mainly by higher gasoline prices. However, as core inflation remained anchored at 2.0 per cent, we expect the Bank to continue to hold interest rates steady through the rest of this year.”
- Inflation hit 2.4 per cent in January, up from 2.2 per cent in December.
- The average of the Bank of Canada’s core inflation measures was 2.0 per cent last month, down slightly from 2.1 per cent in December. Core inflation now sits right at the Bank’s 2 per cent target.
- Gasoline prices rose 11.2 per cent on a year-over-year basis in January. Lower oil prices in January last year, due to global supply glut, contributed to the sharp annual increase in gasoline price last month. Excluding gasoline, inflation held steady at 2.0 per cent.
- Mortgage interest costs (up 5.3 per cent) continued to put upward pressure on inflation, although its growth has been slowing down since last June.
- Higher prices in fresh vegetable (up 5.0 per cent) and passenger vehicles (up 2.3 per cent) also contributed to the higher inflation last month.
- With the global economy stabilizing and Canada’s core inflation remaining steady at the Bank’s 2.0 per cent target, we expect the bank to keep the interest rate on hold for the rest of this year.