Inflation is surging ahead, but as long as we can keep the global economy nice and F***ed up, interest rates should stay at record lows. Free money!
Core inflation, which excludes volatile elements such as gas and food, surprised economists by jumping to 2.2 per cent in September annualized from 1.9 per cent in August. Headline inflation also surged higher, to 3.2 per cent annualized, as clothing, tuition fees, car prices and transportation costs all contributed to higher prices for consumers.
Economists had expected an overall annual rate of 3.1 per cent in September and a core rate of two per cent.
Jimmy Jean, economic strategist with Desjardins Capital Markets, called the CPI “pop” a short-term issue as tuition is a one-off event, clothing prices are seasonal, and auto prices are playing catch-up.
“From the Bank of Canada’s perspective, we don’t believe this to be much of a worry as it is not indicative of broad-based accelerating price pressures,” he said in a note.
Mark Carney, governor of the central bank, is universally expected to maintain the benchmark lending rate at one per cent, with many economists now projecting a resumption in policy tightening no earlier than the second half of 2012 as external headwinds are still the most pressing issue for the Canadian economy.