Published: Mon, August 20, 2018
Money | By Ralph Mccoy

Cost for gas puts the squeeze on inflation rates in Alberta

Cost for gas puts the squeeze on inflation rates in Alberta

The Canadian dollar traded up at 76.38 cents USA compared with an average of 76.03 on Thursday after Statistics Canada reported the annual inflation rate hit 3.0 per cent in July, its highest level since September 2011.

The result is higher than what economists had predicted, expecting the year-over-year cost rise to be 2.5 per cent.

Those second-quarter GDP figures will come out on August 30.

At 9:35 a.m. EDT (1335 GMT), the Canadian dollar was trading 0.56 per cent higher at $1.3078 to the greenback, or 76.44 USA cents.

In July, the cost of living rose 3.0% on a year-over-year basis in July, following a 2.5% increase in June.

CIBC economist Andrew Grantham said the reading "at least modestly" increased the odds of a September interest rate hike by the Bank of Canada.

However, the average of Canada's three measures of core inflation, which leave out more-volatile data like pump prices and are closely watched by the central bank, rose last month to 2.0 per cent compared with 1.96 per cent in June.

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BMO strategist and expert Benjamin Reitzes also noted in his Friday report that core inflation remained at 2% and that one month does not make a trend.

Reitzes expects the central bank to keep its key interest rate target on hold at its September 5 announcement, but foresees a raise in October.

The price of air transportation was also a big factor in the higher rate, with the costs of flying increasing by more than 28 per cent in the past year, according to Statistics Canada's tabulations.

"The overall backdrop for inflation hasn't changed all that much".

And recent interest rate hikes pushed up mortgage rate costs.

The costs in Canada of buying passenger vehicles, auto insurance, food, telephone services, air transportation and travel tours were also up, said the government statistical agency.

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