Yahoo Finance Canadian inflation hits levels not seen since 1991
Canadian inflation topped 5 per cent in January, for the first time since September 1991.
Statistics Canada says the Consumer Price Index (CPI) rose 5.1 per cent year-over-year, higher than estimates of 4.8 per cent. It was 4.8 per cent in December.
For the sake of comparison, the CPI increased 1 per cent in January 2021 on a year-over-year basis.
Without gasoline, the CPI rose 4.3 per cent, the fastest pace since 1991.
The CPI rose 0.9 per cent on a monthly basis, the largest increase since January 2017, after a 0.1 per cent decline in December.
Prices for services rose 3.4 per cent year-over-year, while goods rose 7.2 per cent.
Hot Canadian real estate
Hot housing markets helped push shelter costs up 6.2 per cent, the fastest pace since February 1990.
The owned accommodation index measures the ongoing costs of homeownership. It rose 6.1 per cent year-over-year. The homeowners' replacement cost rose 13.5 per cent.
Statistics Canada says other owned accommodation expenses, which include commissions on the sale of real estate, were up 14 per cent, putting upward pressure on shelter prices amid rapid price growth in real estate during the pandemic.
Prices also went up for renters; the rented accommodation index increased 3.2 per cent.
Higher food prices
Supply chain issues led Canadians to pay more for groceries, with prices for food purchased at stores up 6.5 per cent, the largest yearly increase since May 2009.
Fresh or frozen beef rose 13 per cent, fresh or frozen chicken rose 9 per cent, while fresh or frozen fish was up 7.9 per cent.
Margarine was up 16.5 per cent, while condiments, spices and vinegars gained 12.1 per cent.
Shortages of materials and higher shopping costs resulted in a 2.9 per cent increase in the price of alcoholic beverages bought at stores.
Higher gas prices
Canadian drivers paid more at the pumps compared to the previous month, as gasoline prices rose 4.8 per cent. This was due to concerns over global oil supplies and international political events.
Year-over-year prices rose less in January (31.7 per cent) compared to December (33 per cent), but that's because prices shot up 6.1 per cent month-over-month in January 2021.
The Bank of Canada's plan for interest rates
The Bank of Canada is widely expected to raise its key overnight rate on March 2.
Desjardin's managing director and head of macro strategy Royce Mendes says protesters blocking key routes are likely to disrupt supply chains, leading to higher food prices. He also says energy prices are expected to rise.
"Still, that's not enough to justify a 50bp hike by the Bank of Canada in March, nor the seven rate hikes priced in to markets for this year," said Mendes.
"It's clear that central bankers need to tighten policy, but high household debt levels will temper the Bank of Canada's aggressiveness."
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
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