Inflation in Canada has risen higher than expected, raising the prospect of a jump in interest rates. Statistics Canada reported Thursday that from January 2002 to January 2003, the Consumer Price Index, excluding energy cost, increased by 3.5%. That’s the third consecutive identical 12-month rise.

Energy prices were the main factor behind the total 4.5% increase in the CPI from January 2002 to January 2003. This is far above the target range set by the Bank of Canada. We will get its reaction when it releases its decision on interest rates next Tuesday.

The inflation number boosted early trading of he Canadian dollar. It’s up one-fifth of a cent to US67.11¢.

Corporate profits in Canada rose to their second highest level ever last year, as both manufacturers and retailers reported sharp gains. Canadian corporations reported a total of $156.3 billion in profits in 2002, up 5.8% from 2001.

Last year’s level was second only to the peak of $173 billion recorded in 2000, when high profits in energy and the booming electronics and telecommunications industry led the way. The increase in profits in 2002 followed a 14.6% decline in 2001.

Non-financial profits surged 9.6% in 2002 to $123.9 billion. However, the financial group of industries suffered a 6.5% profit slide in 2002, led by a decline in the depository credit intermediaries, mainly chartered banks.

In the U.S., the Commerce Dept. is reporting that orders for durable goods rose 3.3% in January, the largest jump in six months, as the battered manufacturing sector struggles to turn around. Orders for durable goods, or items meant to last three years or longer, climbed to $174.78 billion last month.

The U.S. Labor Dept. said the number of Americans filing their first claims for unemployment insurance climbed to a two-month high last week. Initial jobless claims rose unexpectedly by 11,000 to 417,000 in the week that ended Saturday. That’s the second consecutive monthly gain.

So far, neither of the U.S. reports has had an effect on pre-equity market trading.

Asian markets rose slightly overnight. Tokyo’s Nikkei Stock Average edged up 2.57 points to 8,359.38. Hong Kong’s Hang Seng index rose 17.96 points to 9,134.24, ending a five-session decline.

European markets are trading flat in early afternoon trading. In London, the FTSE 100 index is up a mere 6.4 points to 3,599.7. The bourses in Paris and Frankfurt are similarly flat.

Here at home, investors are waiting for several of the big banks to report. Quarterly results are expected from CIBC, TD, National Bank and Laurentian.