Canada’s inflation rate rose to 4.4% in April, surpassing economists’ expectations and marking an increase from the previous month. Economists had predicted a decline in the inflation rate to 4.1% from the 4.3% recorded in March. This rise in the consumer price index is the first since it reached its peak of 8.1% in June of the previous year.
The month-over-month change in the Consumer Price Index (CPI) showed a 0.7% increase, exceeding the forecasted 0.4% gain. Several factors contributed to the inflation drivers, including a significant 28.5% year-on-year increase in mortgage interest costs due to higher interest rates. Rents also played a role, rising by 6.1% and further contributing to the inflation rate.
However, the increase in grocery prices was relatively lower, with a 9.1% rise compared to the 9.7% increase seen in March. This moderated increase helped offset some of the inflationary pressure.
The Bank of Canada has maintained its policy rate since January, closely monitoring the data to gauge the effectiveness of its series of rate hikes over the past year in addressing inflation. The central bank expects the annual inflation rate to gradually decrease to around 3% in the coming months. However, achieving the target of 2% inflation may take longer.
CIBC chief economist Avery Shenfeld commented that while the acceleration in the consumer price index was minimal, it could still be concerning for those expecting consistent progress. He noted that the rise in two-year yields after the data release indicates that the possibility of future rate hikes cannot be ruled out, especially if the labor market shows signs of continued strength.