Canadian Consumer Price Inflation - May 17, 2013

BCREA ECONOMICS NOW

Canadian Consumer Price Inflation - May 17, 2013

Canadian inflation remained remarkably muted in April. Consumer price rose only 0.4 per cent in the 12 months to April, a significant deceleration from the already low 1 per cent reading in March. The dip in inflation was primarily the result of lower gasoline prices, though inflation was broadly weak across all CPI components. Core inflation, which strips out the most volatile components of the CPI, such as food and energy prices, increased 1.1 per cent in April. Consumer prices in BC actually declined, falling 0.8 per cent as consumers paid over 4 per cent less at restaurants due to the expiration of the HST.

Inflation is now running near the bottom of the Bank of Canada's 1-3 per cent control range, a situation which in normal circumstances would be a very strong sign of an impending interest rate cut. Indeed, if inflation continues to fall well short of the Bank's mandate of targeting 2 per cent inflation, it may become difficult for the Bank to continue to prejudice concerns about the state of household debt over the health of the wider economy.