Inflation shock revives rate hike talk (Reuters)

 Inflation in the Canada rose in March, markets amazing, and when combined with raised bubbly Q1 growth signs the likelihood of the Central Bank will soon resume increases in interest rates.

Due to the strong rises in gasoline and the prices of foodstuffs, the annual inflation rate shot up to 3.3% in March, Statistics Canada said on Tuesday, the highest level since September 2008 and above the Bank of Canada comfort zone.

On the basis of months on the other, the price index rose to 1.1% in February, the sharpest rise since January 1991.

"I was certainly surprised by the number". Everyone was surprised. (It was) a little more than expected, "said Jacqui Douglas, a strategist of senior currency at TD Securities in Toronto.

"The markets were launch around when exactly the first hike (Bank of Canada) is going to come." It definitely looks like it to come in the course of the next few months, as opposed to later this year, "said."

The Canadian dollar strengthened after the report and markets started this year in a slightly higher probability of rate hikes in price on each date of policy-announcement of the Bank of Canada. Even more suddenly depart may 31 and July see the sooner that the Bank will tighten credit.

The rate of core, closely watched by the Central Bank, inflation remained tame but it was also higher that the markets had anticipated.

The Bank of the Canada target inflation in a range of 1 to 3 per cent.

March, Canada had largely gone to bucking the trend to the increase in prices seen in many other countries. The recent increase in the rising Canadian dollar reached the year peaks 3-1/2 a helped reduce import costs.

Statistical Canada also expressed Tuesday February wholesale return given some of the gains achieved during the previous six months, down 0.6%, but activity remained above recession levels.

The composite leading indicator rose 0.8 percent in March, double the increase that had been scheduled, on the heels of a revised gain of 1.1% in February.

Analysts said until this low growth in February but growth data points in the first quarter overall.

"Our view was that, as move us forward, we will see persistent strength of the economy and that the Bank research to restart its program (higher rates) in the summer months," said Dawn Desjardins, Assistant Chief Economist at Royal Bank of the Canada.

"I don't think this as that this will not suffice to revive things, but at the same time that it is certainly something that they will keep a very keen on because it passes a little contrary to certain things."", they have been worried."

The Central Bank was the first country in the G7 of advanced economies to raise interest rates last year, but has kept its unchanged rate to 1 per cent since September, pending further evidence that the global recovery is strengthened.

In its quarterly report on 13 April, the Bank of the Canada should total CPI would peak at about 3% at some point in the second quarter because of the impact of high energy and prices of foodstuffs as well as provincial changes to sales taxes.

He said that it expected the rate to ease to 2% in mid-2012 target.

Core, on the other hand, inflation had fallen in the previous months, and the Bank has seen amounting to its target at about the same time.

The Canadian dollar increased top C$ 0.9552 to the US dollar, is $1.0469, following the Tuesday data, from the Monday close to C$ 0.9642 to the US dollar.

Overnight index swaps, which trade based on expectations for the key central bank rate, showed a probability of 91.2%, the Central Bank would keep rates unchanged in may, down by more than 99% on Monday. Markets are fully priced in a quarter-point in September increase.