Economy: Inflation within a comfortable range

Statistics Canada's closely watched indicator, the Consumer Price Index (CPI) added 0.5% in January, taking inflation to 2.5% for the 12 months ended January. The Bank of Canada's core index, at 2.1% for the same period, was right on target, suggesting no policy changes are forthcoming.

"The 2.1% reading on core inflation,î says Douglas Porter, deputy chief economist at Bank of Montreal, "brings us right back to where the Bank of Canada expected it to be for the first quarter in its January Monetary Policy Review. Headline inflation at 2.5% is still above its call of 2.2%, but it should drop notably by March.î

The culprits driving inflation are higher gas and food prices. Gasoline prices increased 6.8% in January while food prices for food purchased from stores rose 4.9%. Year over year, food prices rose 4.2% while the cost of energy advanced 6.5%. The electricity index rose 7.3%. In fact, prices rose in seven of the eight major components in the 12 months, the exception being recreation, education and reading.