Annual inflation rate hits 2.3%

CTVNEWS

Gas prices pump up annual inflation rate to 2.3%

CTV.ca News Staff Published Thursday, April 19, 2007 8:28AM EDT

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Fuelled by higher gasoline prices, Canada's annual inflation rate hit 2.3 per cent in March, up from 2.0 per cent in February.

Compared to March 2006, Canadian consumers paid 10 per cent more for gasoline last month.

Statistics Canada said the cost of the goods and services in the Consumer Price Index (CPI) was also pushed higher by mortgage interest and homeowner's replacement costs.

The rise was tempered by a drop in the price of natural gas -- which fell 15.7 per cent in March, compared to a year earlier.

On a month-to-month comparison, the CPI rose to 0.8 per cent, a slight increase from February's 0.7 per cent.

There has not been such a significant surge in inflation since the aftermath of Hurricane Katrina in September 2005, when consumer prices shot up 0.9 per cent.

The report said the core rate of inflation -- which excludes the eight most volatile items on the index -- also jumped 2.3 per cent.

That rate is used by the Bank of Canada to determine future inflation trends. The current statistics have helped to solidify expectations that the central bank won't cut interest rates.

The core rate of inflation is now well ahead of the 2 per cent target set by the Bank of Canada.

"Core inflation remains too hot for the bank's comfort, and the non-core elements continue to bubble along noisily (especially food and energy)," Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said in a note to clients.

The central bank is set to present its interest-rate decision on Tuesday and its monetary policy report on Thursday.

"We suspect that next week's report... could subtly shade the inflation risks as more important than growth concerns," said Porter.

Here's what happened in the provinces and territories. Previous month in brackets.