Case for interest rate hike builds with resilient inflation data: analysts
OTTAWA — The country showed signs of growing price pressures last month with inflation staying strong and its underlying pace grinding higher — both of which propped up expectations that higher interest rates are on the way.
The annual inflation rate for August receded somewhat to 2.8 per cent, easing from July’s three per cent pace that marked Canada’s highest reading in seven years. Last month’s step back was largely due to more-moderate expansion in gasoline prices, Statistics Canada said Friday as it released its latest consumer price index.
The resilience of the August headline number kept it above the mid-point — and close to the top end — of the Bank of Canada’s target range of one- to three-per cent. The inflation-targeting central bank uses interest-rate hikes as a tool to help prevent price growth from rising too high.
Ahead of its rate decisions, the Bank of Canada also keeps close watch on the three measures of underlying inflation, which strip out more-volatile items like gas prices.