Inflation Report from the Canadian Chamber of ...

March 20, 2007
20 March 2007
 
Inflation Report from the Canadian Chamber of Commerce
 
The following report is excerpted from a notice sent by the Senior Economist at the CCC.
 
Headline inflation, as measured by the All-items consumer price index (CPI), rose 2.0% in February 2007 compared to a year earlier. The increase represents a significant acceleration from the 12-month change of 1.2% in January. Fairly big gains had been anticipated but the actual increase surpassed market expectations.
 
The Bank of Canada's core measure of inflation (which excludes the 8 most volatile components of the CPI as well as the effect of changes in indirect taxes) also took a big jump rising 2.4% between January 2007 and January 2006, compared with 2.1% the previous month.   Core inflation has now drifted well above the Bank's 2.0% inflation-control target. …
 
The bottom line: The core rate of inflation now stands at its highest level since early 2003. The sharp increase in February will certainly come as a surprise to the Bank of Canada. In it's latest Monetary Policy Report, the Bank had expected core inflation to average 2.1% in the first quarter and 2.0% in the second quarter of 2007. Nonetheless, core inflation should ease back to its target as we progress into the second half of the year as economic growth is expected to remain fairly subdued. Today's inflation report leaves the Bank of Canada in no rush to change its key policy rate.
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