Low energy prices lead to decelerating inflation rate

The rate increased just 0.8 percent last month

Low energy prices mean Canada’s inflation rate increased just 0.8 percent last month, Statistics Canada reported. That’s the smallest jump since October 2013.

The agency’s April inflation reading, which was released less than a week before the Bank of Canada’s next scheduled interest-rate announcement, was much lower than the 1.2 per cent increase in March.

Statistics Canada’s latest consumer price index found that cheaper year-over-year energy prices were among the biggest factors behind the weaker inflation rate, as prices rose in seven of the index’s eight major categories.

Gasoline prices fell 21 per cent in April compared with the previous year, while fuel oil tumbled 20 per cent and natural gas dropped by 14.6 per cent, the report said. The agency found that prices in all other major categories rose to the point that excluding energy items would bring the inflation rate up to 2.2 per cent

The core inflation rate, which is monitored closely by the Bank of Canada and excludes some volatile items such as gasoline, was 2.3 per cent last month. It followed a reading of 2.4 per cent in March.

In February, the central bank warned the turbulence of the global oil-price crash could briefly bump inflation into negative territory, but it also said at the time that there was no reason to worry about outright deflation.

Even with the weaker inflation rate for April, Bank of Canada governor Stephen Poloz is widely expected to stand pat on the key overnight interest rate at next Wednesday’s policy meeting.

Last month, the bank said its outlook for inflation, the key indicator behind rate decisions, remained “roughly balanced.”

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