Annual inflation rate cools slightly to 2.2%

OTTAWA Higher pump prices helped the annual inflation rate stay in the upper half of the central bank’s target range last month — but even without pricier gas, underlying inflation managed to reach its strongest pace in six years, Statistics Canada said Friday.

Overall, the annual inflation rate cooled slightly in April to 2.2 per cent to remain just above the two per cent midpoint of the Bank of Canada’s range. The latest number was a touch below the March figure of 2.3 per cent, which was inflation’s highest year-over-year reading since 2014.

Beyond gas, pricier air transportation and restaurants applied upward pressure on inflation in April. The biggest downward forces came from the cheaper costs of digital equipment, travel tours and natural gas.

The underlying or core prices, meanwhile, continued their steady, gradual climb last month.

The average of the Bank of Canada’s three measures of core inflation, which omits more-volatile items like gas prices, edged above the two per cent mark last month for the first time since February 2012. The core average for April was 2.03 per cent, up from 1.97 per cent the previous month.

Inflation figures are important for the Bank of Canada, which scrutinizes them ahead of its interestrate decisions. It can use rate hikes as a tool to help prevent inflation from climbing too high.

But despite the strength of the recent readings, they are unlikely to have a major impact on an upcoming rate decision because governor Stephen Poloz has predicted inflation to remain above two per cent for all of 2018.

Last month, Poloz challenged the notion that the two per cent midpoint represented some unbreachable barrier. With higher energy prices, he said it’s natural for the long-term trend line to balance itself out — and he called it a “positive thing.”