The annual pace of Canadian inflation crossed the 5.0% mark for the first time in more than 30 years. The consumer price index rose 5.1% in January, compared to an annual increase of 4.8% in December, Statistics Canada said Wednesday.
Housing, gasoline and food prices drove much of January’s increase, the federal agency said.
Gasoline prices rose 31.7% last month, compared with January 2021, amid growing concerns over global oil supplies linked to the threat of Russian military action against Ukraine. Excluding gasoline prices, Statistics Canada says annual inflation would have been 4.3% in January, which the agency says is its fastest pace on record.
Prices for food purchased from stores rose 6.5% year over year, the largest annual increase since May 2009. The agency noted that prices for beef, chicken and fish all rose faster in January than in December, while those for margarine and condiments, spices and vinegars jumped more than 12% from January 2021.
According to Statistics Canada, higher shipping costs linked to global supply chain issues have driven up the cost of food. Housing prices rose 6.2% year over year, the fastest growth since February 1990, due to rising new housing prices and rent increases.
Managing Director and Head of Macroeconomic Strategy at Desjardins, Royce Mendes, pointed out that inflation should accelerate further due to the continued rise in energy prices. The publication of the inflation report comes exactly two weeks before the Bank of Canada’s next announcement on its key interest rate. The central bank has kept its key rate at 0.25% since the start of the COVID-19 pandemic in March 2020, but recently abandoned its promise to keep the rate at its emergency level.
Observers expect the bank to raise rates as part of the March announcement, and it would likely be the first in a series of hikes this year in an attempt to calm inflation.
The average of Statistics Canada’s three measures of core inflation, which are considered the best indicators of underlying price pressures and closely monitored by the Bank of Canada, stood at 3.2% in January, up from 2.93% in December.
According to Statistics Canada, this is its fastest increase since August 1991.