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Canada October Inflation Stays Near Bottom of Target Band

Canada Inflation Stays Near Bottom of Carney Target Band
Governor Mark Carney will probably keep borrowing costs unchanged until the third quarter of 2013, according to economists surveyed by Bloomberg. Photographer: Norm Betts/ Bloomberg

Canada’s inflation rate remained near the bottom of the central bank’s target band for a third month in October as slower gains in energy prices blunted increases in property taxes and restaurant meals.

The consumer price index rose 1.2 percent in October from a year ago, the same as the prior two months, Statistics Canada said today from Ottawa. Core inflation, which excludes eight volatile products, advanced at a 1.3 percent pace for a second month. Economists surveyed by Bloomberg forecast total inflation would be 1.1 percent and the core rate would be 1.2 percent.

The Bank of Canada has held its key lending rate at 1 percent for more than two years and says that inflation will remain below its 2 percent target until the end of next year. Governor Mark Carney will probably keep borrowing costs unchanged until the third quarter of 2013, according to economists surveyed by Bloomberg.

“The Canadian consumer is going to become more price sensitive and pickier” because of high debt loads and other signs of a weak economy, said Derek Holt, Scotiabank’s vice-president of economics in Toronto. “The Bank of Canada is on hold for a long time yet.”

The Canadian dollar was little changed after the report, trading at 99.72 cents per U.S. dollar at 8:50 a.m. in Toronto. Two-year bond yields were little changed at 1.11 percent.

Slower Increases

Energy price gains slowed to a 1.7 percent year-over-year pace in October from 2.9 percent in September, Statistics Canada said today. Electricity inflation decelerated to 1.7 percent from 6 percent and gasoline price increases slowed to 4 percent from 4.7 percent.

Property taxes rose 2.8 percent in October from a year earlier while restaurant meal prices advanced 2.1 percent.

On a monthly basis, total inflation rose 0.2 percent in October and the core rate climbed 0.3 percent. Economists surveyed by Bloomberg predicted that the overall monthly rate would increase 0.1 percent and core by 0.2 percent.

Seasonally adjusted inflation gained 0.3 percent in October and the adjusted core rate rose 0.1 percent.

Other reports this week have suggested modest consumer demand, including a 0.1 percent increase in September retail sales that trailed economist expectations and the Teranet home resale index, which showed annual price gains slowing for an 11th month in October.

“Our measured food price inflation was virtually nil” in the quarter that ended Sept. 29, grocery chain Metro Inc. Chief Financial Officer Francois Thibault said on an earnings call last week.

Finance Minister Jim Flaherty said in a speech yesterday he may offer fresh stimulus if global demand stumbles, affecting the domestic economy. Carney, who sets interest rates to keep inflation in the middle of a 1 percent to 3 percent band, has also said he has options to mitigate a shock coming from outside the country.

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