Canadian inflation rate slows in May, as the price pressures are at the lowest since the year 1999, a trend which will challenge the recent efforts of Bank of Canada to set a stage for the increase in rate of inflation.
The consumer price index rose 1.3 per cent in the month of May from a year ago, down from an annual pace of 1.6 per cent in the month of April, reported the Statistics Canada on Friday from Ottawa.
The measures of annual core inflation, an important indicator used by the Bank of Canada which excludes the volatile components such as the gasoline, have fell to the lowest in almost two decades. Average of the central bank’s three core measures have declined to 1.3 per cent, lowest since the March of 1999.
In the last week, Bank of Canada has started to play down the sluggish inflation numbers, suggesting that they have been simply capturing the lagged effects of past excess capacity. But the numbers are much lower than their forecasts. The inflation for the first two months of second quarter is averaging 1.5 per cent, whereas the Bank of Canada forecasts of 1.7 per cent.
The economists surveyed by Bloomberg had forecast the inflation would slow down to 1.5 per cent from 1.6 per cent in the month of April on the basis of lower gasoline prices. The prices rose 0.1 per cent on the monthly basis, lagging 0.2 per cent of the median economist forecast.
The Bank of Canada’s ‘common’ core rate was 1.3 per cent in May, the ‘median’ core rate was 1.5 per cent and the ‘trim’ measure was 1.2 percent. Recent changes in the electricity policy in Ontario seems to be having an impact. Electricity prices in that province were down 16.1 per cent year over year in May, bringing inflation down in the Ontario to 1.4 per cent from 1.9 per cent in the month of April.
Inflation is important to the central bank since its mandate is to target inflation at 2 per cent, an objective it has largely failed to deliver on over the past five years. When it talks about being less concerned about inflation, the Bank of Canada gives itself more leeway to talk about hiking interest rates, as it has started do.
On a seasonally adjusted basis, consumer prices fell 0.2 per cent in the month of May, and Gasoline prices fell 4 per cent. Year-over-year, gasoline prices were up 6.8 per cent.
That is down from a 15.9 per cent increase in the month of April. Gap between the goods and services inflation is widening. Price increases for the services were 2.3 per cent in the month of May, compared with 0.1 per cent for the goods. The difference between the two rates was the widest since the year 2015.
What Canada Needs To Do More For Refugees?
Mrudula Duddempudi.
