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Carbon levies drive inflation up 2%


May 16, 2019  


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Canada’s annual inflation rate edged up to two per cent in April from 1.9 per cent in March, driven in part by a carbon levy that pushed up gasoline prices in six provinces, Statistics Canada data showed on Wednesday.

Prices gained 0.4 per cent from the previous month, led by a 10 per cent rise in gasoline prices, Statscan said, in line with a Reuters survey of analysts. The annual rate rose to the Bank of Canada’s two per cent target for the first time since December.

Prime Minister Justin Trudeau slapped a carbon levy on four provinces in April because they had not followed federal guidelines to create their own carbon pricing plan. Two other provinces also increased their carbon levies in April.

Carbon pricing has become a battleground issue between the federal Liberal government and provincial conservative leaders, several of whom are challenging the imposition of the federal levy in court ahead of the October general election.

There have been mixed signals from the economy recently. Canada added a record 106,500 jobs in April, but gross domestic product shrank slightly in February.

The Bank of Canada has put interest rate hikes on hold amid a slowing domestic and global economy, following five increases since July 2017.

Late last month the central bank held interest rates steady and removed wording around the need for future hikes, while lowering its growth forecast for this year.

CPI common, which the central bank says is the best gauge of the economy’s underperformance, was at 1.8 per cent, the same as the previous month.

CPI median, which shows the median inflation rate across CPI components, was at 1.9 per cent, while CPI trim, which excludes upside and downside outliers, was at two per cent.

(Reuters)


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