Business

Inflation heats up to 2.2% in February as energy and food prices spike

The cost of living went up at a 2.2 per cent annual pace in February, its highest level since 2014, mainly because of a sharp increase in the price of energy.

Gasoline prices up 12% in past year, while restaurant food has gotten 4% more expensive

Food and gasoline price hikes were the biggest contributors to the spike in the inflation rate. (The Associated Press)

The cost of living went up at a 2.2 per cent annual pace in February, its highest level since 2014, mainly because of a sharp increase in the price of energy.

Statistics Canada reported Friday that the inflation rate rose to a 2.2. per cent annual rate in February, from 1.7 the month before.

Energy costs have increased by 5.3 per cent in the year up to February, and gasoline prices specifically have jumped by 12.6 per cent over the past year. Higher prices for food at restaurants were also a big factor, up four per cent in the past year.

Mortgage interest costs increased by 2.3 per cent in the past 12 months, a marked changed from recent years when borrowers could always bank on getting a better, even lower rate every time their mortgages were up for renewal.

"That's a big swing from recent years, when falling borrowing costs were regularly holding down inflation," Bank of Montreal economist Doug Porter said. "Clearly, the pendulum has swung on that one."

On the flip side, the price for electricity (-4.7 per cent), traveller accommodation (-4.8 per cent), digital computing equipment and devices (-5.9 per cent), video equipment (-10.1 per cent) and furniture (-1.8 per cent) have all gotten cheaper, on average, in the past 12 months.

Across the country, the inflation rate heated up in every province in February, but nowhere more than in Atlantic Canada.

"Growth was strongest in the Atlantic provinces, led by higher prices for food purchased from stores," the data agency said in a release.

Toronto-Dominion Bank economist James Marple noted that recent minimum wage hikes were likely a factor in the increase in restaurant meal prices, and as such they should be discounted as a factor in inflation from here on out.

But overall, he thinks the Bank of Canada will be paying close attention to Friday's inflation report.

"After several months below two per cent, inflation pressures have picked up and have moved on top of the Bank of Canada's target," Marple said. "Today's data does create the risk that the Bank of Canada moves sooner, but with downside risks to the economic outlook still elevated, this summer remains most likely to see the next policy interest rate hike."

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