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Canada Inflation Rises to 1.9% on Energy; Core Slows

Oct. 22 (Bloomberg) -- Canada’s annual inflation rate quickened in September to the fastest pace since January on energy and shelter costs.

The consumer price index rose 1.9 percent, after a 1.7 percent gain in August, Statistics Canada said today. The core rate that excludes eight volatile items such as gasoline slowed to 1.5 percent from 1.6 percent, the slowest pace since December. Economists forecast the inflation rate would be 1.9 percent and the core rate 1.6 percent, according to the median of 15 estimates in a Bloomberg News survey.

Bank of Canada Governor Mark Carney said Oct. 20 that core inflation, which he uses as a guide to underlying price trends, will remain below 2 percent until the fourth quarter of 2012 on slower consumer spending and global growth. The bank kept its key lending rate at 1 percent this week and its forecast anticipated a “gradual” reduction in monetary stimulus because of “considerable slack” in the economy.

“Overall it really highlights the fact that core inflation is really quite tame in Canada,” said Robert Kavcic, a Bank of Montreal economist in Toronto. “It confirms what we’re thinking; they are going to be on hold well into 2011.”

The Canadian dollar advanced to C$1.0255 per U.S. dollar at 8:10 a.m. in Toronto, compared with C$1.0267 yesterday. One Canadian dollar buys 97.51 U.S. cents.

Energy Rises

Energy price gains accelerated to 5.6 percent in September from a year earlier, versus a 5 percent gain the previous month, Statistics Canada said. Shelter costs advanced 2.5 percent and passenger vehicle prices rose 5 percent as manufacturers curbed discounts, the report said.

The Bank of Canada said this week that sales tax increases in Ontario, British Columbia and Nova Scotia will quicken inflation by 0.7 percentage point from July to June 2011.

The bank predicted inflation would average 1.8 percent in the third quarter and 2.1 percent in the fourth quarter, and the core rate would be 1.6 percent in both periods.

On a monthly basis, overall consumer prices rose 0.2 percent in September after a 0.1 percent decline the previous month. The core rate rose 0.2 percent in September.

Economists predicted that monthly prices would rise 0.1 percent, and the core rate would be 0.3 percent.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Christopher Wellisz at cwellisz@bloomberg.net.

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