David Kawai | Bloomberg via Getty Images Consumer prices in Canada rose in May at an unprecedented rate since January 1983, raising analysts’ previous forecasts, mainly due to expensive gasoline, official figures showed on Wednesday, boosting pressure on the central bank to raise interest rates “more dynamically “. Canada’s annual inflation rate accelerated to 7.7% in May, surpassing 6.8% in April and analysts’ forecasts of 7.4%, according to Statistics Canada. Inflation is now above the Bank of Canada’s 2% target for 15 months. “It’s clear that central banks have lost sleep due to inflation … with this report, they will have to renew their prescriptions for sleeping pills,” said Jimmy Jean, chief economist at Desjardins Group. “We are really in a state of persistence. And that is what keeps the central banks on alert,” he added. “That’s why the Fed decided to move 75 basis points. And we believe the Bank of Canada will do the same.” The Bank of Canada raised interest rates to 1.5% from 1.0% this month and said it was ready to act “more vigorously” if needed to tame inflation. On July 13, money markets changed about 80% from a very rare 75 bp increase. Economists say the staggering May stakes make an oversized move extremely likely. Prices in Canada rose more in May than in April in each province due to higher pump prices and were boosted by higher service costs. Excluding gasoline, the annual interest rate rose 6.3% from 5.8% in April, Statscan reported. “It was not just the 12% increase in the price of petrol that was widely known, but the fact that every measure of the core took a big step up from the revised upward levels,” said Doug Porter, chief economist at BMO Capital Markets. “It is quite clear that the pressures are spreading and are in danger of becoming much more entrenched,” he added. Energy prices rose 34.8% year-on-year, while grocery price gains rose to 9.7% in April and housing cost inflation also rose to 7.4% in April. Prices for services rose more in May than in April, led by hotels and restaurants. The Common CPI, which the central bank says is the best measure of the economy’s performance, reached 3.9%, exceeding the 3.5% forecast and corresponding to a high of July 1991. The average CPI and the cut, with 4.9% and 5.4% respectively, were the highest recorded. The May figures were the first to apply newly restructured weights to the basket, although Statscan said the change had no effect on the interest rate. It also included a way to measure the prices of used cars, but that too had no effect on the headline number.
