Statistics Canada says gasoline and food continued to push up inflation in February to 2.6 per cent, the second consecutive monthly increase.

The overall cost of consumer goods rose by 0.1 per cent during the month from a year ago, after rising by two-tenths of a point in January.

As well, core inflation — the underlying pressure on consumer goods, excluding volatile items such as energy and fresh foods — rose two notches to 2.3 per cent, above the Bank of Canada's two-per-cent target line.

The big mover was gasoline, which rose 2.6 per cent from January, and was 8.9 per cent higher than a year ago.

Meanwhile, the cost of food continues to increase at elevated rates — it was 4.1 per cent higher than a year ago.

Economist reaction

"Energy and gasoline prices continue to dominate newspaper headlines, but food price inflation has been holding steady at roughly four per cent year over year for the past six months," said TD economist Sonya Gulati.

"Out-sized price gains in the food category have important implications not just to the headline number, but for those families on fixed income or tight budgets, who are seeing food costs squeeze out their ability to spend on other essential or discretionary items."

Overall, prices increased in seven of eight major components tracked by Statistics Canada, with recreation, education and reading bucking the trend.

Regionally, Quebec and Ontario both experienced significant increases in annual inflation. Prices rose by four-tenths of a point to 3.2 per cent in Quebec, thanks to a 13.4 per cent pop in gas, while Ontario's rate rose half a point to 2.9 per cent as electricity costs rose 8.9 per cent.

Inflation expected to cool

BMO deputy chief economist Doug Porter said that while price gains are expected to cool in the coming months, overall prices gains will still be above the Bank of Canada's target rate.

"Even with some further upward pressure from gasoline prices in next month’s reading, inflation should begin to recede in March thanks to some very favourable year-ago comparisons for both headline and core," he said.

"However, both are only receding from levels already well above the Bank of Canada’s 2% target."

Earlier this month, the Bank of Canada warned of higher inflation rates for 2012 as oil prices increased and the economy continued to grow. It expects inflation to remain around two per cent for the rest of the year.

Bank of Canada governor Mark Carney has kept Canada's key interest rate at 1 per cent since September 2010, the longest period of no rate changes since the 1950s.

Rate cuts a possibility

While some economists point to the bond market as a sign the next rate move might be upwards, not all agree.

A report from Capital Economics says the Bank of Canada's next move could be to cut interest rates.

"February's rise in the official core inflation figure...will possibly elicit talk of higher interest rates to come," the report said.

"Considering the increasing slack in labour markets and moderate labour costs, however, we do not think that this uptick in core inflation points to higher interest rates at all."

The report also suggested that a weaker housing sector could be the catalyst for the Bank of Canada to cut rates.

"If we are correct about weaker housing activity ahead, then in a year from now we think interest rates will be lower," it said.

With files from CBC News