Inflation Ticks Up But Price Pressures Remain Muted in Canada

Inflation in Canada picked up in September, but price pressures remained subdued as the nations economy emerges from the aftermath of the pandemic.

Annual inflation accelerated to 0.5% in September, after hovering at 0.1% in August and July, Statistics Canada reported Wednesday from Ottawa. Still, it remains at well below typical levels as companies keep prices in check -- giving the Bank of Canada license to keep interest rates at historic lows in order to stoke growth.

Economists had forecast annual inflation at 0.5% in September.

The average of the core inflation measures -- often seen as a better gauge of underlying price pressures -- picked up slightly to 1.73% in September, from 1.7% in August. Economists were forecasting core inflation readings to remain unchanged at 1.7%, below the banks 2% inflation target.

On a monthly basis, prices fell 0.1%, matching the median forecast in a Bloomberg survey.

Excluding gasoline, consumer prices rose 1%.

Wednesday‘s report suggests the social distancing measures and capacity restrictions on businesses are keeping price pressures subdued and that’s unlikely to change anytime soon with the second wave of Covid-19 apparent in several large Canadian cities.

The inflation data and a separate retail sales release are the last major indicators the Bank of Canada will see before its Oct. 28 rate decision and monetary policy report.