Pressure to Raise Interest Rates



By: ORIT ALON  
Published: May 21st 2010
in Economics » Local

Bank of Canada
Pic: wikimedia commons

The annual inflation rate jumped in April a bigger-than-expected four-tenths of a point to 1.8 per cent, mostly due to base effects from higher gasoline prices. What is the major concern for the Bank of Canada is that underlying core inflation also rose sharply by 0.3 per cent from March and to 1.9 per cent on an annual basis.

 

While both core and overall prices remain below the bank's two-per-cent target, the underlying inflationary pressures have been considered surprisingly strong in an economy that is still operating significantly below capacity. In the United States the numbers shown opposite trend and prices, as reported last week were moving lower.

 

Other significant increases came in the cost of purchasing a car, which cost 5.3 per cent more in April from a year earlier, while food prices were relatively tame registering a one per cent increase.

 

Consumer confidence in future growth is reflecting in the latest results from TNS Canadian Facts. The survey suggests that Canadians may still not actually be ready to cross that threshold when it comes to their confidence in the Canadian economy. Although Canadians are pretty okay with the here-and-now, concern about the future is growing. Overall, the index fell below the 100-point marker after finally passing it last month for the first time in two years. It ended the month at 98.7, down 1.8 points from April's 100.5.

 

VP of TNS Canadian Facts explains that Canadians seems to be lurching forward and back based on the news they're getting: "Last month the news was positive, this month it's negative. It seems that we can expect this bumpy ride to continue along with the uneven economic news landscape.”




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