"Inflationary pressures are really absent, there's really no inflation to talk about"
- Carlos Leitao, chief economist at Laurentian Bank of Canada
Canada's annual inflation rate surged for the second consecutive month in June to 1.2% after hitting 0.4% in April, the lowest level in more than three years. The rise in the nation's cost of living was mainly driven by increasing gasoline and car prices, which rose 4.6% and 2%, respectively, as well as a modest 1.2% advance in shelter and food prices. However, price pressures remained muted as the Bank of Canada signalled an extended pause on interest rates. Overall, consumer prices were higher in six of the eight components tracked by Statistics Canada. The rise from 0.7% in May put Canada's inflation rate back into the targeted band of between 1-3% that the BOC strives to achieve. Nevertheless, it remains still below the bank's ideal 2.0% inflation goal, the level the BOC does not expect to reach for some time.
Core CPI, which strips out volatile food and energy costs, declined 0.2% in the month but accelerated to a 1.3% annual rate compared with 1.1% a month earlier. The central bank expects total CPI inflation to be 0.7% and core inflation to be 1.1% in the second quarter, according to its quarterly estimates. Both measures are seen to increase to 2% by mid-2015.
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