February inflation rises to 1.4%

Canada's annual inflation rate rose in February to 1.4 per cent from the 1.1 per cent rate seen in January, Statistics Canada reported Thursday.

Economists had been looking for 12-month inflation to cool a bit to one per cent for February.

Higher prices for food and shelter were the primary reasons for the increase, Statistics Canada said.

Food prices increased7.4 per cent during the 12-month period to February, following a7.3 per centincrease in January.The main contributors to theoverall jump in food costswere a25.8 per cent hike in the price of fresh vegetables, a9.7 per cent rise in the price of bakery and cereal products, and a6.1 per centincrease in meat prices.

Shelter costs, the second-largest factor, increased3.0 per cent, which wasslightly less than the3.3 per cent rise in January.

Holding inflation back was a year-over-year decline in the price Canadians were paying at the gasoline pumps.Gasoline prices in Februarywere 19.7 per centbelow levels in February last year.

Excluding gasoline,the annual inflation raterose2.5 per cent in the12months to February.

The Bank of Canada's core inflation rate which factors out many volatile influences and is used by the central bank for the purpose of setting monetary policy, such as lending rates advanced1.9 per cent over the12months to February, identical to the increase posted in January.

Deflation not a risk

"This result shows that deflation remains a remote risk in Canada at this point, especially with the Canadian dollar adding pressure to some import costs," said BMO Capital Markets economist Douglas Porter.

"Even so, inflation remains below the[Bank of Canada's] two per centtarget and is expected to head lower in the months ahead as the weak economy bears down more heavily on pricing power."

Porter saidthe inflation outlook "is likely mild enough especially if the [Canadian dollar]extends its recent rebound to allow the[Bank of Canada]to also dabble in quantitative easing, following the [Federal Reserves] lead."

With the key overnight lending rate already cut to 0.5 per cent, the Bank of Canada has said it will lay out its plans for quantitative easing shortly. That could see the central bank try to push down interest rates on government debt by printing money to buy bonds.