World Economic outlook - Canada inflation rate, consumer price index december 2011 : Canada’s inflation rate slowed more than economists forecast in December as increases in gasoline prices continued to fade and automobile costs fell.
The consumer price index increased 2.3 percent in December from a year earlier following November’s 2.9 percent rise, Statistics Canada said today in Ottawa. The increase was the smallest since February and below all 23 estimates in a Bloomberg News economist survey with a median of 2.7 percent.
The core inflation rate, which excludes eight volatile items such as gasoline, slowed to 1.9 percent from November’s 2.1 percent pace. Economists had a median forecast of 2.2 percent for core inflation, with the result slower than all estimates.
Bank of Canada Governor Mark Carney kept his benchmark interest rate at 1 percent this week, prolonging a 15-month pause. The central bank also projected inflation would slow to a 1.5 percent annual pace in the April-June period.
Gasoline prices rose 7.6 percent in December from a year earlier, slower than November’s 13.5 percent advance and the slowest since the 7.2 percent gain in November 2010, Statistics Canada said today.
Food prices rose 4.4 percent in December following November’s 4.8 percent year-over-year gain, while automobile costs fell 0.2 percent after rising 1.8 percent in November.
On a monthly basis, overall consumer prices dropped 0.6 percent in December from November, while core inflation fell 0.5 percent. Economists surveyed by Bloomberg predicted total and core rate would both decline by 0.2 percent on the month. Seasonally adjusted inflation fell 0.2 percent in December from the month before.
Faster Annual Inflation
While inflation slowed more than forecast, the result still capped a year that had the fastest average increase since the central bank adopted an inflation target in 1991.
Consumer prices rose at an average annual pace of 2.9 percent last year, up from a rate of 1.8 percent in 2010. Food and energy led the acceleration, Statistics Canada said.
The Bank of Canada runs monetary policy with a goal of achieving a 2 percent annual inflation rate, the mid-point of a 1 percent to 3 percent target range.
“The overall inflation profile is marginally firmer in this projection, partly reflecting some expected persistence in the slightly higher-than-anticipated prices observed recently for motor vehicles and electricity,” the bank said in its Jan. 18 Monetary Policy Report.
Carney has said that he has “flexibility” in how quickly he brings inflation back to its target during an economic recovery that may be prolonged by the need for countries to reduce large trade and budget deficits. The bank said this week that economic output will remain below its potential through the third quarter of next year, suggesting continuing downward pressure on prices.
Investors are anticipating inflation will stay close to 2 percent, based on the gap between regular 10-year government bonds and securities whose payouts fluctuate to adjust for changes in inflation. The so-called break-even rate on 10-year bonds was 2.08 percent yesterday.
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