Canada’s inflation shoots up to 2.6% as sales tax break ends.

Canada’s annual inflation rate showed a surprise jump to 2.6% in February, surpassing expectations as a sales tax break that ended in the middle of last month pushed prices higher amid an already broad-based increase, data showed on Tuesday.

This is the first time in seven months that the rate of increase of consumer prices has crossed the 2% mark, the mid-point of the Bank of Canada’s target range of 1% to 3%. In January, inflation was at 1.9%.

Without the tax break, inflation in February would have been 3%, Statistics Canada said.

The inflation number expanded currency market bets for a pause in the interest-rate-cutting cycle next month to over 70% from 59% before the numbers were released.

The Canadian dollar firmed after the data and was trading up 0.06% at 1.4283 to the U.S. dollar, or 70.01 U.S. cents. Yields on the two-year government bond surged by 5.7 basis points to 2.596%.

On a month-on-month basis, prices rose by 1.1% in February from 0.1% the prior month. Analysts polled by Reuters had forecast the yearly inflation at 2.2% and 0.6% on a monthly basis in February. The BoC had said last week that it expected inflation to reach 2.5% in March amid price pressures due to tariff-related uncertainty.

Source: REUTERS