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-Sebastien Lavoie, assistant chief economist at Laurentian Bank Securities
The Canadian Dollar was little changed versus its U.S. counterpart immediately after the nation's April inflation data was released, which reached the Bank of Canada's target for the first time in two years, driven by higher energy costs. Statistics Canada said that the CPI index gained half a percentage point to 2% last month from the previous year, whereas core inflation, which strips out volatile items, remains at 1.4%. On a monthly basis consumers paid 0.3% more than they did in February. However, Stephen Poloz, the central bank's Governor said last month that he would disregard price increase and focus instead on spare capacity in the nation's economy, which will keep core inflation below 2% until the beginning of 2016. Also, he said that he is neutral on the direction of the next interest rate decision.
The gain in energy costs was the quickest since November 2011 and included a 6.6% rise in gasoline and a 4.6% jump in electricity rates. Food inflation reached 1.9% in April, up from 1.5% a month earlier. The Bank of Canada expects inflation to average 1.6% between April and June, reaching the 2% goal in the first quarter of 2015. The inflation report is the last before a June 4 decision on the bank's policy interest rate, which has been 1% since 2010.