Canada September Inflation Holds Near Central Bank Floor

Canadian consumer prices advanced at a 1.1 percent pace for a second month in September, close to the bottom of the central bank’s target range, on gains in shelter and food costs.

The core rate, which excludes eight volatile products, also matched August’s pace at 1.3 percent, Statistics Canada said today from Ottawa. Economists surveyed by Bloomberg forecast total inflation of 1.0 percent and core inflation of 1.4 percent.

Governor Stephen Poloz said last week that growth has “disappointed” and the economy is operating below the level the Bank of Canada expected six months ago. The bank predicted in July that inflation will stay below its 2 percent target until the second quarter of 2015. It’s scheduled to make an interest rate announcement and provide a new forecast Oct. 23, and economists predict the key interest rate will remain at 1 percent, where it’s been for more than three years.

“It re-enforces that the bank is going to have a lot of breathing room on the inflation front to remain sidelined,” Mazen Issa, a macro strategist at Toronto-Dominion Bank’s TD Securities in Toronto, said in a telephone interview.

The Canadian dollar was little changed following the report, trading at 1.0297 per U.S. dollar at 8:53 a.m. in Toronto. One Canadian dollar buys 97.11 U.S. cents

Shelter costs rose 1.4 percent in September after an August pace of 1.1 percent, with gains in natural gas and rent, Statistics Canada said. Food prices increased 1.2 percent, including a 7.2 percent jump in the fresh vegetable category.

The gain in total inflation was curbed by a 0.3 percent decline in gasoline and a 0.1 percent fall in health and personal care products.

Target Band

The central bank sets interest rates to keep inflation in the middle of a 1 percent to 3 percent band. The rate of price increases has remained below 2 percent for 17 months.

On a monthly basis, both total and core inflation rose 0.2 percent in September. Economists surveyed by Bloomberg predicted that total monthly prices would rise 0.1 percent and the core rate would increase 0.3 percent.

Seasonally adjusted inflation rose 0.2 percent in September and the adjusted core rate rose 0.1 percent.

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