Inflation accelerated in Canada in November

Inflation accelerated in Canada in November with signs of stronger consumption may encourage the Bank of Canada to adopt a more hawkish tone in 2018. Inflation has been slightly higher than anticipated and will continue to be boosted in the short term by temporary factors. Governor Poloz may emphasize higher interest rates will likely be required before the end of first half of 2018.
Persistently weak inflation had been one of the main arguments against further interest-rate increases. But inflation is coming in faster than the central bank had forecast in October, when it predicted it would average 1.4 percent in the final three months of 2017.
The inflation rate accelerated to 2.1 per cent in November to reach its highest mark in nearly a year, Statistics Canada said Thursday. The November inflation reading followed a 1.4 per cent increase in consumer prices in October. Last month’s increase was driven by higher costs for gasoline and air transportation, compared with a year earlier.
Notice that annual pace of inflation has now surpassed the Bank of Canada’s ideal target of two per cent following a two year low of one per cent in June. Excluding gasoline, November’s inflation rate was 1.5 per cent, an increase from 1.3 per cent in October.
Statistics Canada also released data Thursday that showed retail sales expanded 1.5 per cent in October, thanks to a boost in new car sales, while retail e-commerce sales increased 19.4 per cent in October, compared to a year earlier. However, it accounts for just 2.6 per cent of overall retail sales.