Inflation rises 2.5% thanks to boost from higher energy prices

By Andy Blatchford, The Canadian Press

The country’s annual inflation rate rose to 2.5 per cent in June as consumer prices grew at their fastest pace in more than six years, Statistics Canada said in a report Friday.

The federal agency’s latest inflation number received a boost from higher energy prices, especially gasoline, fuel oil and other fuels. It followed a 2.2 per cent reading for May.

Other big contributors behind last month’s stronger inflation figure were pricier airline tickets, restaurants and mortgage interest costs. The downward pressure on prices last month was led by cheaper costs for telephone services, travel tours and digital equipment and devices.

The June pace lifted inflation to its highest point since February 2012 when it was 2.6 per cent. It also moved the number farther away from the two per cent mid-point of the Bank of Canada’s target range.

The central bank, however, has been expecting inflation to rise.

Last week, the central bank predicted inflation to move as high as 2.5 per cent — due to temporary factors like higher gas prices — before it settles back down to two per cent in the second half of 2019.

The Bank of Canada can use interest rate hikes as a tool to help prevent inflation from climbing too high. Governor Stephen Poloz tries to keep inflation within a range of between one and three per cent.

Poloz raised the trend-setting interest rate to 1.5 per cent last week. It was the bank’s fourth hike over the last 12 months.

The report Friday said the average of Canada’s three measures of core inflation, which leave out more-volatile data like pump prices, rose slightly last month to 1.96 per cent, from 1.9 per cent. Underlying inflation is closely watched by the central bank.

In a separate release, Statistics Canada said retail trade expanded by two per cent in May thanks to higher sales at vehicle and auto parts dealers as well as gas stations. Sales growth was just 0.9 per cent in May if these categories are excluded, the agency said.

The May increase follows an April contraction of 0.9 per cent.

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