Why the surprise jump in Canadian inflation could continue

Core inflation rose on Thursday

Canadian core inflation had a surprise this week and economists are taking a second look. One area that has their attention is rents.

As anyone knows in Canada, rent is out of control, especially in the big cities. Yet official statistics haven’t been capturing it. That might be changing and leading to a big catch-up.

Economists at BMO highlight the change:

“After being stable and mild — bizarrely mild — for years, the rent
component of the Canadian CPI is suddenly blasting higher. A change in
StatsCan’s methodology (i.e., moving somewhat closer to reality) has led
to a sudden acceleration. After averaging just 1.2% annualized gains
over the past 15 years, rents have jumped 2.7% y/y. That’s the biggest
rise in this component since 1992, and we’re likely headed much higher,
since the six-month trend is 4%”


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