(Regina) Bank of Canada Deputy Governor Sharon Kozicki said Tuesday that fluctuations in inflation are to be expected, after the latest Consumer Price Index report showed annual inflation had climbed in August for a second consecutive month.
Statistics Canada reported Tuesday that inflation reached 4.0% last month, after being 3.3% in July, amid rising gas prices.
In the prepared text of a speech Ms. Kozicki gave at the University of Regina, the deputy governor offered her thoughts on the new data.
“Swings of this magnitude are not uncommon, and this is one reason we look at measures of core inflation – which ignore components with more volatile price movements – to get a sense of underlying inflation,” Kozicki said in the text of her speech.
She said the measures showed that inflation has not eased much recently.
The deputy governor also attacked the argument that inflation has fallen if mortgage interest costs are excluded from its calculation. She noted that even excluding these costs, underlying inflation does not appear much lower.
Economists reacting to Tuesday’s inflation report say the data represents bad news for the central bank, although many expect the central bank to continue to hold its key interest rate in a context where the The economy is slowing down.
The Bank of Canada opted to leave its key interest rate unchanged earlier this month after recent data showed the economy contracted in the second quarter.
Even though the central bank refrained from raising its key rate, it warned that the door was still open to further rate hikes if necessary. Ms. Kozicki repeated that message on Tuesday.
“We are ready to raise the policy rate again if necessary,” she said.
