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Canadians paid more for energy, new cars and food last month, as prices rose two-tenths of a point and lifted the annual inflation rate to 1.9 per cent.

It was the first time the rate had risen so high since January.

The increase in the annual rate, after a drop in August, had been expected given the recent run-up in oil prices, but economists stressed price pressures in Canada remain low.

They note that the underlying core index, which the Bank of Canada uses to assess the impact of inflation on the country, actually dropped slightly to 1.5 per cent, well below the bank's 2 per cent target.

And the current rate is relatively elevated, because it is still absorbing the one-time impact of the new harmonized sales tax in Ontario and British Columbia, which the central bank estimates added 0.7 percentage points to overall price levels.

The effect of the HST premium was especially noticeable in Ontario, which at 2.9 per cent had the country's highest rate of inflation.

"The core consumer price index print provides further evidence that prices are well under wraps in Canada," said CIBC economist Krishen Rangasamy.

If anything, core inflation, which excludes volatile items such as energy, will likely continue to moderate somewhat, added TD Bank's Diana Petramala.

"All said, inflationary pressures are expected to remain rather tame in the coming year. The current rate of inflation is largely consistent with the amount of economic slack prevailing in the Canadian economy, as well as the current stage of recovery."

Economists said the September numbers will do nothing to dissuade the Bank of Canada from staying put on interest rates at the next scheduled meeting in December. Earlier this week, the central bank applied the brakes on its tightening policy bias, freezing the policy interest rate at one per cent.

The September increase in the overall rate was mostly attributed to energy, which jumped 5.6 per cent over last year, partly on the back of a dramatic 7.7-per-cent hike in electricity.

Without energy, overall inflation rate would have been identical to the core rate - 1.5 per cent.

As well, Statistics Canada said it noticed a big pick-up in the price of passenger vehicles during the month - to 5 per cent from a 2.2 gain in August - as manufacturers shaved the level of incentives they were offering consumers.

Food rose 2.1 per cent, more that the 1.6 pace seen in August.

On a month-to-month basis, overall prices rose 0.2 per cent - 0.3 per cent seasonally adjusted - from August.

Still, there was a general firming up of prices noticeable in September. The agency said prices rose in seven of the eight component groups it measures.

Aside from energy and automobiles, the main contributors to annual inflation were homeowner replacement costs, which rose 5.6 per cent; food, which advanced 2.1 per cent; transportation, up 3.1 per cent; and shelter costs, up 2.5 per cent.

Prices also rose on cigarettes (4.6 per cent), alcoholic beverages (2.4 per cent) and tuition (3.8 per cent).

The main contributors to lower inflation were shelter costs, which dipped 2.5 per cent, and clothing and footwear, which were 2.2 per cent less in September than last year.

Regionally, prices were higher in every province in Canada compared to last year, with Ontario's tops in the nation and Manitoba lowest at 0.5 per cent.



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Canadian Imperial Bank of Commerce
+0.89%47.82
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+0.94%65.37
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Toronto Dominion Bank
+0.46%59.38
TD-T
Toronto-Dominion Bank
+0.54%81.2

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