Transportation, shelter push up CPI to 1.5%

Statistics Canada says the Consumer Price Index in October was up 1.5% compared with a year ago.

That compared with an annual rate 1.3% in September.

Read: TD Bank joins RBC in hiking mortgage rates

The October result matched the expectations of economists, according to Thomson Reuters.

Prices were up in six of the eight major components with the transportation and shelter sectors contributing the most to the year-over-year increase, offset in part by lower food prices.

The Bank of Canada’s core index, which excludes some of the most volatile items, increased 1.7% compared with a year ago.

Economists had expected the core rate to be 1.8%. The Bank of Canada expects inflation will be under the target rate of 2% until mid-2018 as the economy continues to underperform, says Dawn Desjardins, deputy chief economist at RBC Economics.

Read: Is RBC eyeing further U.S. expansion?

RBC forecasts that the economy will grow at an above-potential pace throughout 2017, absorbing spare capacity, and causing inflation to actually hit the 2% target.

“Against this backdrop there will be little reason for the Bank to ease further and we expect they will maintain the overnight rate at 0.5% through the next year,” Desjardins adds in an economic brief.

Starting in December, the Bank of Canada will start reporting core inflation as three indicators of underlying trend inflation, Fotios Raptis, senior economist at TD Economics, points out in a note to analysts. He writes that the new data will help economists understand the Bank’s monetary policy decisions.

Read: Yellen says case for rate hike has strengthened

The transportation index gained 3% compared with a year ago, due to gasoline prices, which posted a 2.5% increase.

“The Canadian inflation backdrop remained a non-story in October, even if comparisons with last year’s soft fuel prices allowed headline inflation to gain a bit of momentum,” writes Nick Exharos, economist at CIBC Economics in a report.

The oil and gas market’s affect on inflation is lessening, as prices slowly record, adds Raptis.

Read: Wildfires to shave 0.1% off Alberta’s GDP for 2016: report

Statistics Canada says the shelter index posted its largest increase since January 2015 as it rose 1.9% compared with a year ago.

Compared with a year ago, food prices posted their first drop since January 2000 as they fell 0.7% in October.

Prices for food purchased from stores recorded their largest decline since July 1992 as they fell 2.1%. The prices for food purchased from restaurants gained 2.6%.

This month’s inflation data has little impact on Canadian monetary policy, notes TD’s Raptis.