Inflation surpasses central bank sweet pot, rises to 2.3 per cent in May

OTTAWA – Statistics Canada says the country’s annual inflation rate jumped to 2.3 per cent last month, the first time it has been above the Bank of Canada two-per-cent target in more than two years.

The larger-than-expected increase from April’s two per cent will surprise markets — and perhaps even the central bank — which has maintained it is not worried about consumer price pressures.

Only last week, bank governor Stephen Poloz said he believes the recent run-up in the consumer price index from as low as 0.7 per cent last October was a temporary phenomenon fuelled by spiking energy costs and that the real danger still was a return to too low inflation.

But the latest report shows underlying core inflation, which excludes volatile items such as energy, is also is on the march and has now neared the bank’s target at 1.7 per cent.

Statistics Canada says the big reason for the increase in the headline number was the 8.4 per cent increase in energy, including a 6.3 per cent gain in the price of gasoline and a 21.3 per cent leap in natural gas prices.

For core inflation, the key factors in its rise in were meat, traveller accommodation and electricity.