Canada’s consumer price inflation rose to 0.5 per cent in September compared to last year but remained well below the central bank’s 2 per cent inflation target, the country’s national statistics agency reported Wednesday.
The annual inflation had slowed to just 0.1 per cent in July and August and most economists were expecting it to go up by 0.4 per cent in September.
Statistics Canada said that prices were up in six of the eight major components of the consumer price index, with slightly higher inflation largely driven by price changes in the transportation, recreation, education and reading, and higher housing prices.
The data agency said the consumer price index would have increased by 1.0 per cent in September had a 10.7 per cent year-over-year drop in the price of gasoline not been factored in.
Prices rose in seven provinces on a year-over-year basis in September, Statistics Canada said.
RBC economist Claire Fan said the resurgence of COVID cases and subsequent reintroduction of some public health restrictions in Quebec, Ontario and other regions, though not nearly as stringent as the lockdowns earlier this spring, still pose a meaningful threat to the broader economic recovery and price increases in the near-term.
Fan said they expect headline consumer price inflation to grow by just 1.2 per cent in 2020.
“That benign inflation backdrop is in line with the Bank of Canada’s expectations, and should leave monetary policymakers free to maintain interest rates at exceptionally low levels for the foreseeable future,” Fan wrote in a research note.
The Bank of Canada says it intends to keep its benchmark interest rate at 0.25 per cent until its 2 per cent inflation target is sustainably achieved.
The central bank will make its next interest rate announcement on Oct. 28.