OTTAWA: Widespread price gains led by soaring transportation, housing and food costs pushed Canada's inflation rate to an 18-year high of 4.4 percent in September, the government statistical agency said Wednesday.
Inflation was slightly higher than forecasts following a 4.1 percent jump in the consumer price index in August, but exceeded for a sixth straight month the central bank's target range of one to three percent.
The trend challenges the Bank of Canada's position that these inflationary pressures are temporary, owing to supply chain bottlenecks and a bounce back from a plunge in prices at the onset of the Covid-19 pandemic in early 2020.
"The question now is whether (inflation) will be too hot to handle for the Bank of Canada," CIBC Economics analyst Royce Mendes said in a research note.
Mendes said a core component of inflation that is most closely correlated with slack in the economy remains in the central bank's target range.
As such, he predicted the central bank would "continue to view this spate of higher inflation as transitory and not reflective of the underlying economy which still needs to see further healing."
According to Statistics Canada, gasoline prices rose 32.8 percent year-over-year in September, in part due to reduced global oil output.
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Food costs went up 3.9 percent, led by higher prices for beef, chicken, pork, shrimp and prawns, as well as butter, cheese and eggs. Tomatoes prices, however, fell.
New home prices also rose amid higher construction costs and historically low interest rates.
And a global semiconductor chip shortage continued to restrain supplies of passenger vehicles, pushing up prices of new cars and trucks.
After pushback from bankers, Bank of Canada governor Tiff Macklem has acknowledged that inflation could take a bit longer than expected to come back down.
Last week, two major bank chief executives said inflation was building and not transitory as had been suggested by the central bank.
Almost half of businesses surveyed by the central bank said they expect inflation to remain above three percent over the next two years, according to the results published Monday.
The Bank of Canada's next rate decision is scheduled for October 27.
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