Inflation up 2.4 per cent due to higher costs for gas, airline tickets
Slightly stronger inflation likely to lose some momentum
OTTAWA — The country’s annual inflation rate picked up its pace last month to hit 2.4 per cent in an advance mostly fuelled by temporary factors such as higher gasoline prices and steeper airfares, Statistics Canada said Friday.
The federal agency’s October inflation number marked an increase from 2.2 per cent in September and pushed the reading a little farther away from the Bank of Canada’s ideal, two per cent target.
But analysts noted Friday the slightly stronger inflation was likely to lose some of its momentum as the short-term factors fade and, especially, as the data start to show the effects of the recent, sharp decline in oil prices.
For now, experts such as RBC senior economist Nathan Janzen expect the Bank of Canada to stay in a holding pattern at its next interest-rate decision, scheduled for Dec. 5.
With the economy running at full tilt, the central bank is on a rate-hiking path to prevent inflation from climbing too high. Market watchers are predicting governor Stephen Poloz will wait until January before his next rate increase.
However, the timing of future rate hikes could change if the oil-price slump deepens.
“If we have something really unexpected happen on oil prices — like a dramatic (decrease) again — it will start affecting the expectations for the pace of rate hikes from the Bank of Canada going forward,” Janzen said in an interview.
TD senior economist James Marple wrote in a research note that the falling oil prices — and the widening spread on Canadian oil benchmarks — will be of particular importance for Poloz. Marple said the price declines will likely lead to a drop in oil production and income losses in energy-producing regions.
“The impact is not negligible and will slow the pace of Canadian economic growth over the next two quarters,” he wrote.
On its own, however, the inflation report Friday was unlikely to nudge the Bank of Canada in either direction on its next rate decision, several economists said.
The main forces behind the higher inflation were year-over-year price increases of 12 per cent at the pump, 9.4 per cent for airline tickets and a seven per cent rise in mortgage interest costs, Statistics Canada said. Experts, including Poloz, have said stronger gas prices and higher airfares are expected to be short-lived.
The downward pressure last month was led by price declines of 7.2 per cent for video equipment, four per cent for telephone services and 3.9 per cent for traveller accommodation, compared with a year earlier.
Consumer prices were higher last month in all provinces compared with October 2017, but Alberta was the only one to show a slower pace of inflation. A year earlier Alberta’s inflation rate was three per cent, while last month the pace was 2.8 per cent.
In Ontario, Statistics Canada said energy prices slid 2.4 per cent on a month-to-month basis after the provincial government got rid of its carbon cap and trade program.