Canada Inflation Rate Accelerated in February to 2.2%

OTTAWA—Headline inflation in Canada rose at its fastest pace in more than three years in February, and measures of core inflation strengthened.

Canada’s consumer-price index rose 2.2% on a year-over-year basis in February, Statistics Canada said Friday, following a 1.7% advance in January. Market expectations were for a rise of 1.9% according to economists at Royal Bank of Canada.

On a month-over-month basis, prices rose 0.6% in February.

Meanwhile, the February report indicated underlying, or core, inflation strengthened in the month. Underlying prices rose in a range from 1.9% to 2.1%, based on the three preferred gauges used by the Bank of Canada for an average of 2%, versus the previous month’s 1.8% average.

The Bank of Canada sets policy to achieve and maintain 2% inflation. The central bank last raised its benchmark interest rate in January, to 1.25%, its third increase since mid-2017. Officials have indicated they would take a cautious approach to future rate increases amid uncertainty over trade and high consumer debt levels.

TD Bank economist James Marple said the hotter-than-expected inflation numbers stand in contrast to the Bank of Canada’s recent tone, which has emphasized caution. However, he said that from the central bank’s point of view, inflation coming in slightly above 2% is no worse than inflation coming in slightly below that target.

“All told, today’s data does create the risk that the Bank of Canada moves sooner, but with downside risks to the economic outlook still elevated, this summer remains most likely to see the next policy interest rate hike,” Mr. Marple said.

Canada’s inflation rate has remained below 2% for most of the past three years. February’s gain shows inflation rising at its fastest pace since October 2014, when the inflation rate was 2.4%.

The top contributors to the rise in annual inflation in February were gasoline, which rose 12.6%. Food purchased from restaurants and purchases of passenger vehicles also contributed to the overall increase.

Write to Kim Mackrael at kim.mackrael@wsj.com

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