OTTAWA – Canada’s annual inflation rate ticked up in June as the price of food, especially meat, and housing climbed, offset in part by lower gasoline prices.
Statistics Canada said Friday the consumer price index rose 1.0 per cent in June compared with a year ago, following an increase of 0.9 per cent in May.
The move matched economist expectations, according to Thomson Reuters.
The report follows a decision by the Bank of Canada this week to cut its key interest rate by a quarter of a percentage point to 0.5 per cent and lower its expectations for economic growth this year.
In making its decision Wednesday, the central bank said it expected inflation to remain below two per cent until early 2016, while core inflation is forecast to remain near two per cent.
However, Statistics Canada said Friday core inflation was 2.3 per cent. Economists had expected a gain of 2.2 per cent.
Bank of Montreal senior economist Benjamin Reitzes said much of the increase Friday could be attributed to the drop in the Canadian dollar.
“It is clear that the weaker Canadian dollar is having an impact and the fact that the dollar has weakened again in recent weeks suggests that we will get a little more of that pass through into inflation in the months ahead,” he said.
But Reitzes said the Bank of Canada is looking past the impact of the weak loonie and other temporary factors on inflation.
Setting aside what it described as “transitory effects” including the recent fall in the Canadian dollar, the Bank of Canada judged the underlying trend in inflation to be about 1.5 to 1.7 per cent.
The Canadian dollar has fallen about 10 per cent against the U.S. dollar since the start of the year, raising the cost of imported goods from the country’s largest trading partner.
The loonie was down 0.10 of a U.S. cent at 77 cents on Friday.
Economist David Madani of Capital Economics said higher prices in the recreation, reading and education category helped boost the core index, which he attributed to the weaker loonie increasing the cost of travel to the United States.
Excluding energy prices, inflation was 2.1 per cent as seven of the eight major components were up from a year ago.
The transportation index, which includes gasoline, posted its eighth consecutive year-over-year decline as it slipped 2.6 per cent from last year as gasoline prices were down 14.1 per cent from the same month in 2014.
However, on a month-over-month basis, gasoline prices were up 6.0 per cent in June after rising 5.5 per cent in May.
The price of food was up 3.4 per cent compared with a year ago as the price of meat increased 6.6 per cent. Prices were also up for dairy products, fresh fruit and baked goods.
Shelter costs were up 1.0 per cent, boosted by a rise in electricity prices. Home and mortgage insurance costs were also higher.
Regionally, prices were up from a year ago in nine provinces with Prince Edward Island posting the lone drop, seeing a decrease of 0.1 per cent. Saskatchewan posted the largest increase with a gain of 1.9 per cent, followed by Alberta with an increase of 1.7 per cent.