- Nick Exarhos, CIBC World Markets economist
A sharp decline in energy prices put heavy pressure on Canada's inflation in April, as cost of living fell to lowest level since October 2013. The consumer price index rose 0.8% in April from a year ago down from March's 1.2% pace, according to Statistics Canada. The core rate, which strips out eight volatile products, ticked down to 2.3%, after 2.4% pace in March, which was the fastest since 2008. Falling energy prices were the major contributor to the deceleration, with the energy index plummeting 13.5%. Bank of Canada Governor Stephen Poloz said recently that it may take until around the end of 2016 before Canada's economy reaches full output and consumer prices climb to the 2% target. The report is the last high-impact indicator before the next interest-rate decision on May 27, and economists expect the benchmark overnight rate to remain at 0.75% where it has been since a cut in January. The central bank sets interest rates to keep inflation in the middle of a 1% to 3% band. Last month the Bank of Canada said total inflation would average 0.8% this quarter and the core rate would average 2.1%.
A separate report showed retail sales rose more than expected, surging 0.7% to C$42.5-billion in March. The increase was supported by a 1.5% increase at motor vehicle and parts dealers.
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