Yesterday StatsCan

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releasedNew Diet the latestNew Diet inflation stats for October. OverallNew Diet prices were up 0.7% from October 2012 to October 13th, a slowdown fromNew Diet September where prices were up 1.1% year over year. See the graph below for historical trending of both total inflation and core inflation.

inflation canada

Note:  Core inflation excludes eight of the most volatile components (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, inter-city transportation and tobacco products).

So why do inflation

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trends matterSearch job? for Canadians and investors?Search job? For one it is an important factor in the Bank of Canada’sSearch job? decision to increase or decrease interest rates. If inflation is low or trending lower (which is the case rightSearch job? now) the Bank of Canada may delay raising interest rates for a longer period of time to avoid deflation. Deflation is when prices decrease on a year over year basis and can be extremely harmful to the economy and economic growth.

Secondly, lower inflation also meansPlease Donate our sitePlease Donate our site that Canadians experiencePlease Donate our site a smaller loss in purchasing power each year. This is actuallyPlease Donate our site a benefit to anyone on a fixed income that is not adjusted for inflation (often the case for retired folks).

As an investor, it is always a good idea to keep tabs on the direction of inflation as it has implications for the direction of interest rates and loss of purchasing power. It is an important input to your overall investment decision making process.

Read the full StatsCan article. 

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