By Kim Mackrael
OTTAWA--Canada's annual inflation rate accelerated in February, supported by higher prices for gasoline.
Canada's consumer-price index rose 1.1% on a year-over-year basis in February, Statistics Canada said Wednesday, slightly faster than the 1% increase recorded in the previous month. Market expectations were for a 1.3% rise, according to economists at Bank of Nova Scotia.
On a month-over-month basis, prices climbed 0.5% in February.
The Bank of Canada's preferred measures for underlying inflation were unchanged from the previous month, according to Statistics Canada, with the average core CPI in February coming in at 1.7%. Core inflation is meant to gauge price changes in items that exclude volatile goods like food and energy.
The Bank of Canada has said its benchmark overnight rate, held at 0.25% for the past year, will remain close to zero until the economy has recovered enough from the effects of the coronavirus pandemic for its 2% inflation target to be sustainably achieved. Projections by the central bank in January indicated that wouldn't happen until 2023, though some analysts believe the timeline could move forward when the central bank updates its economic outlook next month, given the domestic economy's stronger-than-anticipated performance.
Economists and the Bank of Canada expect headline inflation to temporarily rise toward the upper end of the central bank's 1% to 3% target range in the coming months, largely on the effects of last year's Covid-19 shutdowns, which led to price declines for some goods and services.
BMO Capital Markets economist Doug Porter said headline inflation would likely rise to nearly 3% this spring before fading back to a little above 2% through the second half of this year. "While there are serious risks to the outlook, the most likely outcome on the other side of this traumatic episode is for inflation to re-emerge still close to its 2% trend," Mr. Porter said.
Gasoline prices rose 5.0% on a year-over-year basis in February, marking their first annual increase since the pandemic began as global demand for gasoline gradually recovers. Excluding gasoline, headline annual inflation rose 1.0% in February on an annual basis.
Meanwhile, the cost of food rose 1.8% annually, largely because of higher prices for fresh fruit, and the cost of shelter increased 1.4% year-over-year.
On a seasonally-adjusted basis, Canadian inflation rose 0.1% in February from the previous month.
Write to Kim Mackrael at kim.mackrael@wsj.com
(END) Dow Jones Newswires
03-17-21 0951ET
