Behind the Headlines April, 2006

Article Excerpt

The Bank of Canada raised interest rates in March by 0.25%, to 3.75% from 3.50%. That was the fifth consecutive monthly increase. The increase was largely in response to rising inflation. The consumer price index or “All-items” index was up by an annualized 2.2% in February, down from a 2.8% rise in January. The index includes 600 items. There are other measures that are used to assess the rate of inflation. For example, excluding energy, the rate was the same in January and February — 1.8%. “Core” inflation, or the All-items index excluding eight volatile components identified by the Bank of Canada, increased by 1.7% in February, up from 1.4% in January. The Bank of Canada has a target of keeping the All-items inflation rate around 2.0%, and relatively stable within a band of 1% to 3%. Continued high inflation rates may lead to more interest rate hikes. That could have a negative effect on the Canadian economy. It could slow housing starts due to…

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