Inflation so far not a reason for higher interest rates — BUSINESS REPORT

Pauline Gross
May 20, 2017

Canada's annual inflation rate stood at 1.6 per cent in April, same as in the month of March, as higher energy costs offset a seventh consecutive decline in grocery prices, Statistics Canada said Friday.

As most of the major categories saw only modest gains or even declines in some instances, inflation pulled higher by the outlier of gasoline prices, which were up 9.5% from a year ago.

On the other hand, the agency says fresh produce and clothing applied the most downward pressure on the inflation rate.

Manitoba's annual inflation rate held steady at 1.6 per cent last month as higher costs for consumer items such as water and gasoline were offset by lower prices for things like fresh or frozen beef and children's clothing. Lack of inflation pressures is one of the main reasons why the Bank of Canada, which has a mandate to target a 2 percent inflation rate, isn't expected to match interest rate increases this year by the Federal Reserve.

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Nye said he expects the central bank to maintain a cautious tone in their policy announcement next week, reinforcing market expectations that a rate hike is unlikely this year.

Measures of annual core inflation fell, underlining Bank of Canada Governor Stephen Poloz's concern that excess slack remains in the economy.

CPI-common stayed at 1.3 per cent last month, CPI-median decelerated to 1.6 from 1.7 and CPI-trim slowed to 1.3 from 1.4. Retail sales rose 0.7 percent in the month on a sequential basis.

Prices rose at a slower pace year-over-year in five provinces, while they were unchanged in two provinces.

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