By James Langton

(December 14 – 11:45 ET) – Canadian inflation surprised on the upside today, confirming economists’ expectations that the Bank of Canada will hold the line on interest rates.

BMO Nesbitt Burns Inc.’s chief economist Sherry Cooper says, “This report was higher than expected across the board, and is another reason to believe the Bank of Canada will be in no rush to cut interest rates even if the Fed soon eases.”

Cooper points out that another spike in energy prices combined with higher home and auto costs to push the annual rate to a nine-year high in November. Prices rose 0.5% on the month in seasonally adjusted terms, pushing the annual inflation rate to 3.2% from 2.8% in October. A 5.5% jump in natural gas prices, and another 0.9% jump in gasoline prices led the way, and natural gas prices will push even higher in future reports.

With this report the headline inflation rate has pushed above the Bank of Canada’s 3% speed limit, although the bank focuses on the core rate. “Here the news is much less threatening,” says Cooper, “with core prices rising 0.3% last month and 1.8% annually.”

The core rate pushed up on higher mortgage interest and shelter costs. “Core inflation is expected to push slightly above 2% in the next two months and then top out.”