Food, gas prices push inflation to 3.4%
Higher energy and food prices helped push overall consumer prices up by 3.4 per cent in the 12 months to September, Statistics Canada said Friday.
The September one-year change was just under the 3.5 per cent one-year rate seen in August.
Fuel was a major contributor to the increase seen in September. Gasoline prices jumped by more than 10 cents a litre in many parts of Canada as Hurricane Ike threatened oil infrastructure facilities in the Gulf of Mexico. Gasoline prices eased later in the month after the hurricane threat passed.
Food prices in the 12 months to September rose 5.6 per cent, an increase from the 4.5 per cent rise recorded in August. The cost of bakery and cereal products grew by 15.5 per cent, putting the strongest upward pressure on food prices. Fresh fruit, vegetables and milk also cost more over the 12-month period.
Transportation costs rose by 4.7 per cent, but that was lower than the 5.8 per cent rate seen in August as lower prices were reported to buy and lease passenger vehicles.
"While headline inflation came in lower in September, it still remains quite high," said TD Bank economist Dina Cover. "Nonetheless, we believe that August was likely the peak, as easing price pressures will likely lead to a further moderation in the headline figure going forward."
A softer economic situation will remove some of the upward pressure on prices, Cover noted, giving the Bank of Canada more room to cut interest rates. In a commentary, she said TD expects Canada's central bank will cut its target for the overnight rate by one-half of a percentage point in December.
That forecast is not unanimous among economists. Dawn Desjardins, an assistant chief economist at Royal, said they're looking for another quarter-point rate cut in December.
The Bank of Canada cut the rate target by one-quarter of a percentage point to 2.25 per cent on Oct. 21.
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