Canada's headline inflation rate edged up again in March to stand at 1.9 percent year on year, up from 1.5 percent in February. For the last several months, the story behind the fluctuations in the yearly inflation rate has been the gradual unwinding of last year's sharp fall in gasoline prices, and this was the case once again in April. Gas prices at the pumps are still lower than they were a year ago, but by a much smaller percentage than earlier in the year.
If we leave the gas price movements aside, the inflation story remains relatively uneventful. All eight of the key components were higher year-on-year in March, but there are no particularly worrying signs from the Bank of Canada's point of view. The Bank's favoured core measures of CPI inched higher in the month, to stand precisely at the Bank's 2 percent target level.
Looking forward, it appears that gasoline prices will remain a major driver of CPI trends through the middle of the year. Last year's declines will fall out of the year-on-year calculations entirely, and specialists such as the ubiquitous "Gas Buddy" predict that pump prices will move significantly higher, partly as a result of seasonal factors such as the switch to more refined "summer gasoline". This is likely to push headline CPI above the 2 percent target at least temporarily, but there is little reason to expect that the Bank's core measures will follow suit, so no policy response from the Bank is likely.
No comments:
Post a Comment