By Leah Schnurr
OTTAWA, Feb 19 (Reuters) - Canada's annual inflation rate
picked up to 2 percent in January, the highest since November
2014, lifted by food prices and a rise in gasoline costs and
underlining expectations the Bank of Canada will keep monetary
policy unchanged next month.
Separately, retail sales slumped in December as unseasonably
warm weather in many parts of the country cut into seasonal
purchases, data also released by Statistics Canada showed on
Friday.
Annual inflation was 2 percent, surpassing economists'
expectations for 1.7 percent, and bringing the rate up to the
midpoint of the Bank of Canada's target.
After being suppressed by a drop in energy prices, gasoline
prices jumped 2.1 percent, the first annual increase since
October 2014. Nonetheless, prices still fell 6 percent on a
monthly basis.
Food costs rose 4 percent as consumers paid 18.2 percent
more for fresh vegetables, suggesting the impact of a weaker
Canadian dollar was being felt.
Derek Holt, economist at Scotiabank, said the firmer
inflation figures reinforced ideas that the Bank of Canada will
pause on monetary policy for an extended period.
"They have been fairly explicit on communicating that to the
markets, more on the side of tossing the ball back to the
federal government and on stimulus expectations," he said.
After cutting interest rates twice last year, the bank held
steady at its last meeting in January, noting concern about the
sharp drop in the loonie. The bank is widely expected to keep
policy unchanged again in March. BOCWATCH
The Canadian dollar extended losses against the greenback
immediately after the data. CAD/
Prices rose in seven of the eight major components of the
consumer price index. The clothing and footwear segment was the
only component to decline, dropping an annual 0.3 percent.
The annual core inflation rate, which strips out the prices
of some volatile items and is watched by the Bank of Canada, was
also 2 percent, slightly higher than expected and up from 1.9
percent in the previous month.
December's 2.2 percent decline in retail sales far exceeded
the 0.6 percent drop that was expected and was the largest such
decline since April 2010.
Motor vehicles and parts dealers, a category that also
includes sellers of snowmobiles, saw a 3.9 percent decrease.
Lower sales were widespread across categories, including
clothing and general merchandise stores.
Analysts had expected to see a drop in sales after
November's figures were partly lifted by Black Friday shopping.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Canada inflation, central bank rate http://link.reuters.com/cut67s
Canada economic dashboard http://graphics.thomsonreuters.com/15/sc-canada/index.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>