February Brought Canada’s Fastest Rise in Inflation in 3 Years

A new report from Statistics Canada indicates that the annual speed of inflation is on the rise

The consumer price index pushed up to an annual pace of 2.2 percent in February, the fastest since 2014. In January, the consumer price index was at 1.7 percent.

As the Bank of Canada’s inflation target is 2 percent, concerns have been raised over February’s figure. However, some say there’s no need to sound the alarm yet.

“Inflation is BAAAACK, but it’s not yet a scary monster, being essentially in line with what the Bank of Canada actually wanted to see,” CIBC Chief Economist Avery Shenfeld wrote in a note obtained by Bloomberg. The data from Statistics Canada was released on Friday (March 23).

According to the Statistics Canada report, some of the main contributors to the annual rate’s increase were gasoline, up 12.6 percent, restaurant food, up 4 percent, homeowner’s replacement costs, up 3.6 percent, and mortgage interest costs, up 2.3 percent.

Meanwhile, decreases to the rate came from lowered costs in assets such as electricity, down 4.7 percent, traveller accommodation, down 4.8 percent, and video equipment, down 10.1 percent.

According to a CBC interview with Toronto-Dominion Bank (NYSE:TD) economist James Marple, the recent minimum wage increase could have been partly responsible for the increased cost of restaurant food. Marple went on to say that the inflation news will be kept under close watch by the Bank of Canada.

“After several months below two percent, inflation pressures have picked up and have moved on top of the Bank of Canada’s target,” Marple said.

He added, “[t]oday’s data does create the risk that the Bank of Canada moves sooner, but with downside risks to the economic outlook still elevated, this summer remains most likely to see the next policy interest rate hike.”

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.