Consumer price inflation in Canada hit a new three-decade high in February, bolstering expectations that the Bank of Canada will aggressively raise interest rates in the coming months to curb price pressures. Annual inflation was 5.7% last month, down from 5.1% in January, Statistics Canada reported Wednesday in Ottawa. It is the highest since August 1991 and exceeds the median estimate of 5.5% from a Bloomberg survey of economists.
The average of major central bank measures, often seen as a better indicator of underlying price pressures, came in at 3.47%. the highest since 1991. On a monthly basis, prices rose 1% in February. Inflation is expected to continue to rise after Russia’s invasion of Ukraine pushed commodity prices higher, raising doubts that central bank officials were too slow to recognize risks and correct policy.
Wednesday’s report bolsters expectations that Governor Tiff Macklem will continue a rate hike cycle at the next policy meeting on April 13. The central bank predicted in January that inflation would rise to just above 5% at the start of 2022 and then slow to 3% by the end of this year, but those predictions are already outdated.
The rise in prices became widespread in February, marking the second consecutive month of headline inflation above 5%. Canadian motorists paid 32.3% more for gasoline than a year earlier, while food prices rose 7.4%, the largest annual increase since May 2009. Housing costs rose up 6.6% from a year earlier, the fastest pace since August 1983. Owned and rented accommodation contributed to the increase, with a recovery in youth employment and a recovery in migration to Canada to support rental demand.
Inflation has now exceeded the central bank’s control range of 1% to 3% for 11 straight months. Since Canada introduced inflation targeting in the early 1990s, the inflation rate has averaged around 1.8%.Earlier this month, Macklem raised the bank’s overnight rate to 0.50%, from the emergency low of 0.25% in effect since March 2020 when the Covid19 pandemic hit. North America.
Markets forecast seven increases in borrowing costs over the next 12 months.