Inflation Ticks Up But Price Pressures Remain Muted in Canada

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Inflation in Canada picked up in September, but price pressures remained subdued as the nation’s 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 bank’s 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.

©2020 Bloomberg L.P.

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