Inflation may ease pressure on loonie: analysts

Canada’s annual inflation rate rose to 1.2 per cent last month, still below the Bank of Canada’s ideal target but back within its desired range.

OTTAWA — Canada’s annual inflation rate rose to 1.2 per cent last month, still below the Bank of Canada’s ideal target but back within its desired range.

It likely won’t assuage the central bank’s worries over persistently low inflation in Canada, but it may ease pressure on the falling loonie, economists said Friday.

While it’s reassuring to see inflation back in the bank’s target range, “the report still fails to reveal the kind of thrust that would inspire a tone shift at the (Bank of Canada),” Jimmy Jean, economic strategist with Desjardins, said in a note.

It could take until mid-year for the consumer price index to move to the bank’s ideal two per cent target in a sustained way, he said.

The 1.2 per cent climb in the consumer price index’s basket of goods that Canadians regularly purchase for December was up from gain of 0.9 per cent in November.

The Bank of Canada raised concerns about low inflation on Wednesday after it lowered its forecast and said it was keeping a close eye on prices. The central bank, which worries persistent low inflation may be a sign of weakness in the economy, forecasts inflation will likely reach the two per cent mark in about two years.

The Bank of Canada’s core index, which excludes several volatile components that are part of the broader consumer price index, rose 1.3 per cent for December compared with 1.1 per cent for November.

The report Friday carried a lot more weight than usual, given that the bank has “lifted inflation to exalted status in their worry list,” said BMO chief economist Douglas Porter.

“However, the results are a stalemate for the market since they precisely met the bank’s assumptions,” he said in a note.

“For now, though, inflation has moved above the very low end of the Bank’s comfort zone, providing a touch of breathing space and easing one source of pressure on the loonie.”

The loonie was up 0.19 of a cent to 90.29 cents U.S. before noon Friday.

CIBC economist Peter Buchanan said the Bank of Canada is going to want to see more data before their concerns ease, but the numbers were within expectations.

Just Posted

Break-in at Red Deer business

Social media reports confirm a business break and enter in Red Deer… Continue reading

‘Rough waters’: Spill raises new questions about fast-growing N.L. oil industry

ST. JOHN’S, N.L. — Newfoundland and Labrador’s ambitious plans to dramatically expand… Continue reading

Trudeau rules out snap election call, national ballot slated for Oct. 21

OTTAWA — Prime Minister Justin Trudeau says there will be no early… Continue reading

Canadian firm says it has found largest diamond ever unearthed in North America

YELLOWKNIFE — A Canadian mining firm says it has unearthed the largest… Continue reading

Man from Olds killed in collision near Sundre

A 39-year-old man from Olds was killed in a collision near Sundre… Continue reading

WATCH: More than 100 protest UN migration pact, carbon tax in Red Deer

Chants of “Trudeau must go” echoed through the streets of downtown Red… Continue reading

Man who demolished landmark house ordered to build replica

SAN FRANCISCO — A man who illegally demolished a San Francisco house… Continue reading

Giuliani: ‘Over my dead body’ will Mueller interview Trump

WASHINGTON — With a number of probes moving closer to the Oval… Continue reading

Quebecers criticize western oil but buying more gasoline, SUVs, bigger homes: report

MONTREAL — Quebec’s premier is quick to reject “dirty” oil from Western… Continue reading

Speaker Geoff Regan opens the door to his apartment in Parliament

OTTAWA — One of the best-kept secrets inside the main building on… Continue reading

Baloo the cat is back at home after being mistakenly shipped to Montreal

HALIFAX — Much to the relief of his loving family, Baloo the… Continue reading

‘It’s what we do’: Famous Newfoundlanders help replace veteran’s stolen guitar

ST. JOHN’S, N.L. — Two famous Newfoundlanders stepped in to help an… Continue reading

Quebec’s anti-corruption unit blames media coverage for recruiting troubles

MONTREAL — Seven years after it was created, Quebec’s anti-corruption unit is… Continue reading

Former PQ cabinet minister poised to become next Bloc Quebecois leader

MONTREAL — It appears likely that Yves-Francois Blanchet, a former Parti Quebecois… Continue reading

Most Read