In­fla­tion rate un­changed at 1.6 per cent in April

The Hamilton Spectator - - BUSINESS - ANDY BLATCHFORD

OT­TAWA — The coun­try’s an­nual in­fla­tion rate once again rang in at 1.6 per cent last month as higher en­ergy costs off­set a sev­enth con­sec­u­tive de­cline in gro­cery store prices, Statis­tics Canada said Fri­day.

The agency’s con­sumer price index for April iden­ti­fied higher prices for gaso­line and nat­u­ral gas as the big­gest up­ward driv­ers in yearover-year in­fla­tion. On the other hand, fresh pro­duce and cloth­ing ap­plied the most down­ward pres­sure on the in­fla­tion rate.

Head­ing into next week’s in­ter­est rate an­nounce­ment, ex­perts such as BMO chief econ­o­mist Doug Porter ex­pect the Bank of Canada to em­pha­size the soft­en­ing un­der­ly­ing in­fla­tion in­di­ca­tors, which strip out some of the more volatile com­po­nents.

“The mod­est core in­fla­tion we’re see­ing is prob­a­bly the sin­gle, strong­est ar­gu­ment the Bank of Canada has to do noth­ing,” Porter said, adding that on­go­ing un­cer­tainty over U.S. pol­icy, par­tic­u­larly on trade, would be up there as well.

“There’s just no rush, no ur­gency at all for the Bank of Canada to move on rates.”

Porter said on the one side, there are all kinds of in­di­ca­tors — like hot hous­ing mar­kets, ro­bust con­sumer spend­ing, the low un­em­ploy­ment rate and strong growth to start the year — telling the cen­tral bank to hike its very low in­ter­est rate pol­icy.

But at the same time, he noted Fri­day’s num­bers re­vealed that the av­er­age of the three core in­fla­tion mea­sures has slid to about 1.4 per cent from 1.6 per cent since the be­gin­ning of 2017.

It’s slip­ping fur­ther away from the bank’s ideal tar­get of two per cent, he added.

“While the econ­omy is show­ing a strong mo­men­tum, the in­fla­tion re­mains par­tic­u­larly dis­ap­point­ing,” Na­tional Bank se­nior econ­o­mist Matthieu Arse­neau wrote in a re­search note to clients, which also pointed out that there’s usu­ally a three- to five-quar­ter lag for un­der­ly­ing in­fla­tion to re­spond to eco­nomic con­di­tions.

“For this rea­son, we con­tinue to ex­pect core (in­fla­tion) to speed up in 2017 in line with the re­cent eco­nomic mo­men­tum.”

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