Canada's annual core inflation rate jumped in September to its highest level in nearly three years, causing traders to scale back expectations of a possible central bank interest rate cut this year or next. The core rate sped up more than expected to 2.2 percent from 1.9 percent in August, according to Statistics Canada data on Friday.
The core index is considered a better gauge of price trends because it excludes eight volatile items including gasoline and food. "From a policy point of view the increase in core has got to be of the greatest concern," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
Overall annual inflation rate remained above the central bank's traditional comfort zone at 3.2 percent, a notch above forecasts, as consumers were hit by higher gasoline and food prices. The return of price pressures at a time of weak growth has been seen across many industrialised countries. Canada's inflation rate, which has eased from a 5-1/2 year-high of 3.7 percent in May, remained tamer in September than the US rate of 3.9 percent or Britain's 5.2 percent, both three-year highs. The Canadian dollar firmed immediately after the data to a session high of C$1.0132 to the US dollar, or 98.70 US cents, up from Thursday's North American session close at C$1.0150, or 98.52 US cents.
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