Consumer prices picked up in Canada, causing CPI to hit 2.1% form a year earlier and up from 1.5% in December. Economists had forecasted inflation to hit 1.6%, which poses a drastic increase in price. The hiking in inflation can be attributed to the surging gasoline prices and the new carbon levies. Gasoline prices have posted a 21% gain from the earlier year. Ontario has started a new cap and trade system but it is still unclear how much that system is impacting the prices.
Excluding gasoline, inflation still went up 1.5% year-over-year in January. The BoC is still unlikely to make any changes to its policy rates due to the fact that there is still stability in core inflation. The three measures that are used to measure core all remained below 2% and averaged around 1.6%. The BoC is still concerned with underlying weakness of the economy and has stated that it will continue to monitor core inflation to keep it in check.