On a Wednesday in mid-February 2022, Statistics Canada reported that the country's annual inflation had climbed to 5.1 per cent in January, the first time in more than three decades it had crossed the five per cent line. It is the kind of reading that makes ordinary households feel a change before economists can name it: the gasoline pump, the grocery cart, and the rent or mortgage that anchors the month. The rise arrives at a moment when a distant geopolitical fear over Ukraine is being felt in local prices, and when a central bank that has kept its rate near zero since the pandemic's first s
Canada's Annual Inflation Hits 5.1% in January, First Time Above 5% in Over 30 Years
The first reading above five per cent in more than 30 years
Mark
Five point one per cent. Why is this number treated as a milestone?
Mimi
Because it's the first time above five per cent in more than 30 years, and it came with a rise from 4.8 in December. It's broad too: housing, gasoline and groceries all pushed it.
Luke
Worth noting the milestone is the headline rate. Other readings are record-setting in their own way, but each has its own comparison date.
Mark
Like which ones?
Mimi
Shelter at 6.2 per cent is the fastest since February 1990. Groceries at 6.5 are the biggest since May 2009. Core inflation at 3.2 is the fastest since August 1991.
Mark
And gasoline?
Mimi
Up 31.7 per cent from a year ago, with oil supply worries tied to the Russia-Ukraine threat. But without gasoline the rate would still be 4.3 per cent, a record for that measure.
Luke
So gasoline isn't the whole story. Still, the link between the Ukraine threat and pump prices is the agency's backdrop, not a measured cause.
Mark
What does this mean for interest rates?
Mimi
The Bank of Canada has held 0.25 per cent since March 2020 and recently dropped its promise to keep it there. A March hike is widely expected.
Luke
Widely expected is not decided. And Royce Mendes's view that inflation will accelerate is one economist's forecast, not a certainty.
Der Puls
- Annual inflation jumped to 5.1 per cent, lifting the country past a threshold it had not crossed since the early 1990s.
- Gasoline prices surged 31.7 per cent year over year as fears of Russian action against Ukraine rattled global oil supply.
- Groceries climbed 6.5 per cent, the steepest annual rise since 2009, with beef, chicken, fish and condiments all pushing shopping bills higher.
- Shelter costs rose 6.2 per cent, the fastest pace since 1990, leaving renters and new-home buyers absorbing the sharpest pressure.
- The Bank of Canada, with its policy rate still at 0.25 per cent, is expected to lift it at its March announcement and begin a series of hikes.
On a Wednesday in mid-February 2022, Statistics Canada reported that the country's annual inflation had climbed to 5.1 per cent in January, the first time in more than three decades it had crossed the five per cent line. It is the kind of reading that makes ordinary households feel a change before economists can name it: the gasoline pump, the grocery cart, and the rent or mortgage that anchors the month. The rise arrives at a moment when a distant geopolitical fear over Ukraine is being felt in local prices, and when a central bank that has kept its rate near zero since the pandemic's first spring is poised to begin turning the dial the other way.
On Wednesday morning, Statistics Canada released January's numbers, and the headline was one the country had not seen in more than thirty years: annual inflation of 5.1 per cent, up from 4.8 per cent in December. It was the first time the rate had climbed above five per cent since before 1992.
Three categories carried most of the weight. Gasoline led the way, with pump prices 31.7 per cent higher than a year earlier, amid mounting anxiety over oil supply tied to the threat of Russian military action against Ukraine. Groceries rose 6.5 per cent, the largest annual jump since 2009, as beef, chicken, fish and condiments all climbed, partly because shipping costs were swollen by global supply chain strain. Shelter costs rose 6.2 per cent, the quickest pace since early 1990, driven by new-home prices and rents.
The timing sharpened the story. The report arrived two weeks before the Bank of Canada's next rate decision. The central bank has held its policy rate at 0.25 per cent since the pandemic began in March 2020, and recently dropped its pledge to keep it at emergency levels. Markets widely expect a hike in March, likely the first of several through the year. Core inflation, the measure the bank considers a truer sign of underlying pressure, reached 3.2 per cent, its fastest pace since 1991, adding weight to the case for action.
On Wednesday morning, Statistics Canada released the January numbers, and the headline was one the country had not seen in more than three decades: annual inflation of 5.1 per cent. December's reading had been 4.8 per cent. It is the first time the rate has climbed above five per cent since before 1992.
Three categories did most of the work: housing, gasoline and groceries. Gasoline was the sharpest of them. Pump prices in January were 31.7 per cent higher than a year earlier, with the backdrop of growing worry about global oil supply tied to the threat of Russian military action against Ukraine. Strip gasoline out of the calculation and the annual rate would still have been 4.3 per cent, which the agency says is the fastest pace on record for that measure.
At the grocery store, prices rose 6.5 per cent year over year, the biggest annual jump since May 2009. Beef, chicken and fish all climbed faster in January than they had in December. Margarine and condiments were up by double digits compared with January 2021. Statistics Canada attributed the food increases in part to higher shipping costs stemming from global supply chain problems.
Shelter costs rose 6.2 per cent from a year earlier, the quickest pace since February 1990. The agency pointed to higher prices for new homes and to rent increases as the drivers.
Royce Mendes, managing director and head of macro strategy at Desjardins, said inflation is poised to accelerate further as energy prices keep rising.
The timing matters. The report landed exactly two weeks before the Bank of Canada's next scheduled interest rate announcement. The central bank has held its key policy rate at 0.25 per cent since the COVID-19 pandemic began in March 2020, though it recently dropped its pledge to keep the rate at those emergency levels. Markets widely expect an increase at the March announcement, likely the first of several hikes through the year aimed at cooling price growth.
The bank also watches core inflation, which is considered a better gauge of underlying price pressure than the headline figure. The average of its three core measures reached 3.2 per cent in January, up from 2.93 per cent in December. Statistics Canada says that is the fastest pace since August 1991.
The next marker is the Bank of Canada's March decision, when the first rate increase of the pandemic era is widely expected.
Bemerkenswerte Zitate
Inflation is set to accelerate even further as energy prices continue to rise.— Royce Mendes, managing director and head of macro strategy, Desjardins (paraphrased)
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