Instant view-Canada annual inflation rate accelerates to 6.8% in April

TORONTO (Reuters) - Canada's annual inflation rate accelerated to 6.8% in April, the highest since January 1991, on food and shelter prices, Statistics Canada said on Wednesday.

Analysts polled by Reuters had expected the annual rate to stay at 6.7% in April.

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Market reaction: CAD/

COMMENTARY

ROBERT BOTH, MACRO STRATEGIST, TD SECURITIES

"The headline number was a little bit stronger than we had anticipated but the surprise was core inflation is now sitting about 4.2% year over year so that's a pretty significant pick up from where it was in March."

"The Bank of Canada was already looking at a significant upside risk to its CPI projection from the April monetary policy report. So the headline surprise is just going to push the projections a little higher when they release their next update in July."

"Markets were already expecting the bank to deliver additional 50-basis-point hikes. So we continue to look for the bank to hike by 50 basis points in June and July."

JIMMY JEAN, CHIEF ECONOMIST AT DESJARDINS GROUP

"We were expecting inflation to have marked the peak in March. And that didn't happen, we continue to see inflation creep higher. It's not a major overshoot versus expectations, but it's still a trend that's continuing and inflation in general is above the Bank of Canada's latest forecast. And 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. They've ruled out doing anything more than 50 basis points. But right now, the inflation is saying that policy is perhaps still too accommodating."

"You have pretty much two thirds of the basket that's growing at more than 3%. So in this context, the risks remain tilted to the upside. And the Bank of Canada is going to have to get real about this, that we need to get to neutral very fast."

"Even adding 100 basis points... real interest rates will remain very low. We have to admit that there's a lot of that's still not under control by the bank and it's coming from those foreign shocks. But they have to make sure that it doesn't morph into an inflationary spiral. So the way they're going to be communicating the next steps will be will be critical here."

(Reporting by Steve Scherer and Nichola Saminather Editing by Denny Thomas)