23 February 2018

January’s hike was the largest for this category since April 2016, and was mostly supported by higher prices for restaurant food.

In the same time, BMO Capital Markets senior economist Robert Kavcic says the core inflation, which excludes some of the more volatile categories, was quite normal. The average of three measures of core inflation, closely watched by the central bank, was 1.8% annually last month.

“The Bank of Canada already said that it expected CPI inflation to fluctuate in the nearest future due to different temporary factors (e.g. gasoline and electricity prices),” – Kavcic noted.

“The report points to certain special factors, and also says the core inflation is getting back to 2% as economic slack weakens. Although it’s partially an upside surprise, we don’t see the need to change our outlook for a cautious, but still inclined to tightening central bank.”

As you know, the BoC has raised its key lending rate three times already since last summer. The next meeting is scheduled for March 7.