Inflation Rises

Annual inflation rate sped past expectations to 3.1 percent in June from 2.2 percent in May after the biggest yearly surge in gasoline prices since Hurricane Katrina, Statistics Canada said on Wednesday. This is not good news for Canada especially as the Canadian dollar keeps rising which makes our products more expensive for foreigners.

June marked the first time since September 2005 that inflation rose past the central bank's target range of 1-3 percent. The Canadian dollar rose slightly after the report.

But the Bank of Canada, which last week forecast inflation would peak at 4.3 percent early next year, has signaled it will not try to curb the rampant price growth through interest rate hikes because it expects the underlying price trends to stay in check.

The June results proved it right. Core inflation -- which strips out volatile items like gasoline and food -- was unchanged from May at a tame 1.5 percent.

Excluding only gasoline, consumer prices rose 1.8 percent.

The Canadian dollar moved to C$1.0098 to the U.S. dollar, or 99.03 U.S. cents, from its pre-data level around C$1.0100 to the U.S. dollar, or 99.01 U.S. cents. Bonds were flat across the curve.

The Bank of Canada left rates unchanged at 3 percent last Tuesday, for the second straight time.