Canada’s annual inflation rate rose to an 18-year-high

Oct 22, 2021 By MarketDepth

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Canada’s annual inflation rate rose to an 18-year-high of 4.4% in September, amid increasing gas, housing and food prices. Citizens are now awaiting the Bank of Canada’s rate decision next week.

Transportation Surged 9%

According to Statistics Canada, the transportation index surged more than 9%. Gasoline prices have shot up approximately 33% and new car prices have risen 7.2% within the last year, the data agency said.

“The global semiconductor chip shortage, leading to limited supply, contributed to higher prices in September.”

Statistics Canada

This was the sixth straight month in which inflation surpassed the central bank’s 1-3% control range.

“It suggests there is still momentum at the margin in terms of inflationary pressures that can’t be just dismissed on base effects and other factors. So it’s still a sustained overshoot.”

Derek Holt, vice president of capital markets economics at Scotiabank

Governor Tiff Macklem explained that the Bank of Canada viewed inflation as temporary, though he had previously said that supply chain delays would most likely determine how quickly it would come down. Inflation had not reached 4.4% since February of 2003, when it topped 4.7%.

“The Bank of Canada has been pretty adamant that they think this current inflationary surge is transitory. I don’t think this will change their mind.”

Andrew Kelvin, chief Canada strategist at TD Securities