Canada’s core inflation unexpectedly jumps in September

Core rate reaches 2.2 per cent; consumer prices increase by 3.2 per cent

Canada's annual core inflation rate jumped in September to its highest level since December 2008, causing traders to scale back expectations of a possible central bank interest rate cut this year or next.

The core rate sped up more than expected to 2.2 per cent from 1.9 per cent in August, according to Statistics Canada. This is the first time the core rate has reached more than two per cent since February 2010. The core index is considered a better gauge of price trends because it excludes eight volatile items like gasoline and food.

Overall, consumer prices increased by 3.2 per cent in September from the same month a year earlier, which was led by higher prices for gasoline and food.

Energy prices advanced 12.5 per cent, following a 13.4 per cent increase in August 2011. On a year-over-year basis, gasoline prices rose 22.7 per cent, after gaining 22.8 per cent last month.

Prices for food purchased from stores rose 4.3 per cent in the 12 months to September, falling slightly from last month’s growth of 4.4 per cent.

The cost of transportation was up 7.9 per cent compared to 12 months before, following a 7.0 per cent gain in August. The increase was due to consumers paying more in passenger vehicle insurance premiums. Prices for air transportation and the purchase of passenger vehicles also advanced.

Among major components, shelter costs rose 1.5 per cent, following a 1.8 per cent gain in August.

The largest increase in consumer prices was observed in New Brunswick and Nova Scotia. Both provinces saw a 4.2 per cent increase, led by higher prices for gasoline, food purchased from stores and fuel oil in both provinces.

The smallest increase was experienced in British Columbia with prices averaging only 2.4 per cent higher than a year ago.

In the United States, the rate of inflation rose by 3.9 per cent in September, the U.S. Labour Department reported. This is the largest year-over-year increase in the cost of living in three years. Gasoline and food are largely responsible for the growth.

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