September 25, 2021, 9:12

    VIEW Canada’s annual inflation rate in August hits highest in nearly two decades

    VIEW Canada’s annual inflation rate in August hits highest in nearly two decades

    TORONTO, Sept 15 (Reuters) – Canada's annual inflation rate accelerated to 4.1% in August, the highest since 2003, up from a year-over-year increase of 3.7% in July, Statistics Canada said on Wednesday.

    Analysts polled by Reuters had expected the annual rate to rise to 3.9% in August.


    Market reaction: CAD/




    "There is certainly more going on than just the reopening. We are still seeing sustained pressure on durable goods in particular … It's very notable that vehicles, furniture and appliances are all showing very strong gains from a year ago and contributing to both the headline and the core."

    "Having said all that, this didn't surprise us and I don't think it will surprise the Bank of Canada, they were looking for almost 4% inflation in the third quarter."


    "This does fit with evidence that this is not an entirely transitory phenomenon… There are only really two interpretations of this. One, it's still transitory but with a much higher peak, or two, it is, in fact, a little more persistent than we'd feared. Ultimately we need more time to determine what the true answer is here."

    "There was a very significant upside from contributions from air fares, which is something that would normally materialize in prior months but because of the strange seasonality we have in this late pandemic environment, it materialized today."

    "This doesn't mean anything short-term for the Bank of Canada. They've been very insistent that the inflation shock is transitory. We may see them scale back some of their estimates of potential growth, which may imply a smaller output gap today and through the past, as a way of reconciling the more persistent inflation shocks with their outlook for supply in the economy."


    "A big jump … It is really the mirror opposite of what we saw in the U.S. yesterday, where we had the travel components showing signs of cooling. Here, they are showing signs of heating up."

    "Very, very strong price pressures in categories where we know that there are labour shortages. There is always the possibility those sectors have to raise wages in order to attract employees and then pass that on to end-consumers."

    "It is still part of the reopening effect. In August we were still getting back to normal … That effect will eventually abate but for the time being we're having inflation above 4%, so definitely something the Bank of Canada will keep in mind as it decides on its next move."

    Reporting by Fergal Smith, Nichola Saminather
    Editing by Denny Thomas


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