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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: nihil who wrote (6746)	2/25/2000 7:16:00 AM
From: Graham Dellaire	Respond to of 24042

Canadian Inflation drops! Great for TSE!! Inflation rate fools the experts, dips unexpectedly to 2.3% in Jan. MARIAN STINSON The Globe and Mail Friday, February 25, 2000 Canada's inflation rate defied the experts' predictions and took an unexpected dip in January, but that probably won't stop the Bank of Canada from moving in lock step with the U.S. Federal Reserve Board by raising interest rates again. Lower prices for air fares and autos contributed to a drop in the annual inflation rate to 2.3 per cent from 2.6 per cent in December, Statistics Canada said yesterday. "Even though the U.S. and Canadian economies are booming along, there is remarkably little inflation pressure," said Ted Carmichael, economist with J.P. Morgan Securities Canada Inc. Although rising energy prices exerted little upward pressure on most prices in January's consumer price index (CPI), next month's report could show a sharper increase. Oil prices have climbed in February to a nine-year high, and this week's protest by truckers over fuel costs will likely lead to higher prices for goods in the months ahead, Mr. Carmichael said. Last week, Bank of Canada Governor Gordon Thiessen warned that the central bank is vigilant about inflationary pressure because of rising energy prices. "The Bank of Canada is still on a tightening course [intending to raise interest rates], but January's CPI report makes inflation look like a phantom menace, unseen anywhere outside the energy sector," said Avery Shenfeld, economist with CIBC World Markets. "With the economy showing plenty of momentum, the central bank will choose to nudge rates higher rather than accept the alternative -- a sharply weaker Canadian dollar," he said. The Bank of Canada will match the upward moves by the U.S. Federal Reserve Board and boost interest rates by 50 basis points this spring, he added. (A basis point is 1/100th of a percentage point.) In January, the consumer price index fell 0.1 per cent from December, Statscan said in its monthly release. Energy prices rose only 0.2 per cent in January from a month earlier while gasoline prices fell 0.6 per cent. However, the increase in gas prices may have been underestimated, since daily pump price reports showed a 1.4-per-cent increase during the month, Mr. Carmichael said. "We'll probably see a bounceback in February," he added. The Statscan survey is conducted over several days throughout the month, rather than daily. Natural gas prices climbed 2.4 per cent from December. Global prices for crude oil have been rising because of production cutbacks by OPEC countries. In January, gasoline prices were 25.3 per cent higher than in the same month a year ago. Forecasters had been bracing for a sharp increase in consumer prices, expecting that energy prices would affect a wide range of other products. The core rate of inflation, which excludes food and energy, showed prices rose 1.4 per cent from a year ago, the lowest increase since March, 1999, Statscan said. "Core inflation is a non-event," and over the past three months it has been rising at an annual rate of only 0.4 per cent which is well below the Bank of Canada's target range of 1 to 3 per cent, Mr. Shenfeld said. "This is a very positive performance. Air transportation fell 8.3 per cent from December, primarily because of seasonal discounts for some domestic and transatlantic routes. "With kids in school, to fill the planes they have to cut prices," Mr. Shenfeld said. Travel tour costs fell 9.5 per cent, because of low demand in January for winter holiday packages. Automobile prices also fell as manufacturers offered rebates and dealers gave discounts to spur sales, Statscan said.