(Bloomberg) -- Canadian inflation quickened in May on increases across all eight major components, giving the Bank of Canada plenty of scope to hold interest rates steady.

The consumer price index jumped 2.4% from a year earlier, compared with 2% in April and versus a median economist forecast of 2.1%, Statistics Canada said Wednesday from Ottawa. It was the highest annual rate since October, boosted by increases in food and durable goods prices.

Core inflation, closely watched by policy makers, surged, with the average of the three key measures rising to 2.07%, the highest since February 2012.

Canada’s currency climbed after the report, rising as much as 0.3% against the U.S. dollar. It was trading at C$1.3344 at 8:33 a.m. in Toronto.

Key Insights

  • Wednesday’s report bolsters the Bank of Canada’s view that the economy is emerging from a slowdown. It lends credence to Governor Stephen Poloz’s argument that interest rates will eventually need to move higher, even as his counterparts in the U.S. and Europe lean more towards rate cuts.
  • The latest figures bring inflation above the central bank’s latest quarterly forecast. The central bank revised its 2019 outlook for CPI higher in April to 1.9%, from 1.7% previously.

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  • On a monthly basis, the CPI increase was 0.4%, matching April’s pace and topping the 0.1% median forecast.
  • CPI common core held at 1.8%, median core climbed to 2.1% and trim core accelerated to 2.3%.
  • The largest upside contributor to CPI on an annual basis was shelter costs, which rose 2.7%. Food and transportation were also major drivers.
  • Excluding gasoline, inflation climbed 2.7% on the year.

--With assistance from Erik Hertzberg.

To contact the reporter on this story: Chris Fournier in Ottawa at cfournier3@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary

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