The Consumer Price Index in Canada jumped 4.4 per cent year over year in September.
Statistics Canada says it’s the fastest pace of inflation since February 2003, and up from a 4.1 per cent rise in August.
“The further rise in inflation to 4.4 per cent in September mainly reflects the impact of supply disruptions on food and motor vehicle prices, whereas there is little sign of an increase in price pressures linked to the easing of the coronavirus restrictions of the summer,” said Stephen Brown, senior Canada economist, at Capital Economics.
“Nevertheless, with those supply disruptions ongoing, there seems little chance of inflation dropping below 4 per cent until early next year.”
Excluding gasoline, CPI rose 3.5 per cent year over year in September.
The monthly CPI rose 0.2 per cent in September, the same growth rate as in August. Inflation has been higher for nine consecutive months.
Prices were up across the board, with transportation (+9.1 per cent) being the biggest driver. Shelter (+4.8 per cent) and food (+3.9 per cent) also contributed to the overall increase.
The gain in food prices was due largely to higher prices for food bought at stores, up 4.2 per cent compared to 2.6 per cent in August.
The homeowners' replacement cost index, which is connected to the price of new homes, was up 14.4 per cent.
Drivers continue to feel pain at the pumps with a 32.8 per cent increase in gasoline prices, but those scorching gains were 0.1 per cent lower than in August.
The global semiconductor chip shortage kept car prices elevated, up 7.2 per cent.
The Bank of Canada’s next move
CIBC senior economist Royce Mendes says while measures were higher than expected, the Bank of Canada will maintain its view on inflation.
“The core-common component indicator remained at 1.8 per cent,” said Mendes
“That's the measure that's most correlated with slack in the economy and will likely leave the central bank viewing the recent rise in prices as transitory.”
Karl Schamotta, chief market strategist, at Cambridge Global Markets, says a key indicator anticipates the Bank of Canada will make a move.
“Markets expect the Bank to wind asset purchases down to zero by year end, and overnight index swaps now show three hikes are priced in by the end of 2022 - an absolutely massive change from a few weeks ago, when only one move was expected,” said Schamotta.
The Canadian dollar initially reacted to the inflation data but it was short-lived.
“The loonie leapt roughly 20 basis points in the moments after the release, but has since fallen back, suggesting that market participants don’t view the data as materially impactful for the monetary policy outlook,” said Schamotta.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.