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Inflation accelerates as higher airfares, vegetable prices offset cheaper gas

Last Updated Jan 18, 2019 at 6:13 am PST

A loonie is pictured in Vancouver on April, 2014. Canada's annual inflation rate accelerated to two per cent last month as higher costs for airfares and fresh vegetables offset cheaper prices at the pump.THE CANADIAN PRESS/Jonathan Hayward
Summary

Statistics Canada says the annual inflation rate accelerated to two per cent in December

B.C. posted the largest year-over-year increase, rising three per cent in December

OTTAWA — Canada’s annual inflation rate accelerated to two per cent last month as higher costs for airfares and fresh vegetables offset cheaper prices at the pump.

Statistics Canada says year-over-year consumer prices picked up their pace in December after inflation was just 1.7 per cent in November.

Economists had expected a year-over-year increase of 1.7 per cent for December, according to Thomson Reuters Eikon.

Compared with a year earlier, the report says Canadians paid 28.1 per cent more last month for air transportation and 14.9 per cent more for fresh vegetables, while gas prices fell 8.6 per cent.

Excluding the lower price of gasoline, inflation was 2.5 per cent in December.

The stronger December reading could come as a surprise for the Bank of Canada, which said last week that it was expecting inflation to continue edging down to stay below two per cent throughout 2019, mostly because of lower gas prices.

The report also says the average of the Bank of Canada’s three core inflation readings, which leave out more-volatile items like gasoline, remained just under two per cent last month at 1.9 per cent.

The central bank, which aims to keep inflation between one and three per cent, can raise its trend-setting interest rate as a way to keep inflation from climbing too high.