Inflation creeps higher in April

Pressure increases on central bank

OTTAWA — Canada’s annual inflation rate ticked up again in April, official data showed Wednesday, exceeding analyst expectations and upping the pressure on the central bank to raise interest rates to keep price expectations in check.

Headline inflation hit 6.8 per cent in April, edging closer to the 6.9% per cent hit in January 1991, Statistics Canada data showed. It was the 13th consecutive month above the Bank of Canada’s 1-3 per cent control range.

“We were expecting inflation to have marked the peak in March and that didn’t happen,” said Jimmy Jean, chief economist at Desjardins Group.

“When you look at the core measures, you see a pretty strong pickup. So that’s a cause for concern for the Bank of Canada,” he added, noting that the bank needs to ensure that price pressures do not morph into an “inflationary spiral.”

Bank of Canada deputy governor Toni Gravelle last week acknowledged that the policy rate, at one per cent, was “too stimulative” and reiterated that interest rates need to be higher.

The central bank is widely expected to make a second 50-basis-point increase when it makes its next decision June 1 and money markets are betting that the policy rate will be around three per cent by year end.

“It’s kind of a fine line the Bank of Canada needs to go by . . . because the trick is to try to get inflation down without creating a lot of havoc. But that’s easier said than done,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.

Grocery prices rose 9.7 per cent in April, the largest increase since September 1981, with consumers paying more for nearly everything. Prices for starchy staple foods like pasta and bread led gains.

“Russia’s invasion of Ukraine in late February put upward price pressure on food products that use wheat,” Statistics Canada said.

Shelter prices in April rose at their fastest annual pace since June 1983, while gasoline prices fell slightly in April from March. Still, consumers paid 36.3 per cent more at the pump for gasoline in April compared with a year ago.

“This is the relative calm before another downpour in next month’s report, as gasoline prices are tracking a double-digit increase for May alone,” Doug Porter, chief economist at BMO Economist, said in a note.

CARLOS OSORIO ■ REUTERS An employee restocks a shelf at a Walmart Supercentre in Toronto.