Canadian Consumer Prices Rose 

Canadian Consumer Price Inflation - October 19, 2012

Canadian consumer prices rose just 1.2 per cent in the 12 months to September, as higher energy prices were tempered by lower year-over-year prices for motor vehicles and food products.

The Bank of Canada's core inflation index, which excludes the eight most volatile components of the CPI like energy and food, rose 1.3 per cent in September, down from 1.6 per cent in August.  Inflation in BC fell below 1 per cent in September as prices were flat month-over-month and up just 0.7 per cent year-over-year.

The Bank of Canada, which meets Tuesday to decide on interest rates, remains caught in a fine balance.  The trajectory of the output gap and the outlook for inflation would under normal conditions, and under conventional monetary economics  have already pushed the Bank to tighten interest rates. However, potential interest rate increases have been deferred by a near crisis environment in Europe, a stop-and-go US economy, and perhaps most importantly, the highly indebted position of Canadian households.

These factors will remain far more influential over monetary policy over the next year than monthly inflation reports. However, September's soft inflation numbers will help make the case for holding rates steady at 1 per cent. 

For more information, please contact: 

Cameron Muir
Chief Economist
Direct: 604.742.2780
Mobile: 778.229.1884

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