This from TD today (going “hand in hand” with a “lower than consensus” inflation report released earlier in the day)

Persistently high shelter costs remain the most prominent threat to the Bank of Canada’s efforts to restore overall inflation to its 2% target, according to a new TD report.

Mortgage interest costs swelled by 27.4% in January compared with the same time last year, new inflation figures by Statistics Canada showed on Tuesday, with rental inflation jumping by 7.9% on a year-over-year basis.

Those surges helped push shelter inflation to an annual rate of 6.2%, even as the overall inflation rate dropped to 2.9% in January.

“Given its huge 30% weighting within the CPI [consumer price index] basket, this component [shelter] alone has accounted for more than half of overall Canadian inflation,” TD director and senior economist James Orlando said in a note following the release of the latest CPI figures.

Shelter inflation, he added, has become “the biggest hurdle” preventing the Bank of Canada from cutting rates – and with the central bank largely powerless to bring shelter prices down immediately, Orlando said it could “start looking past” the influence of shelter inflation.

“As long as the BoC continues to focus on inflation metrics which are being held up by shelter inflation, Canadians will suffer under the weight of high interest rates,” he wrote.

Orlando said the influence of shelter costs had kept underlying inflation measures higher in Canada than other major economies, and that using the US Federal Reserve’s preferred inflation metric would actually adjust Canada’s inflation rate to just above the 2% mark.

“What’s interesting is that if we calculate Canadian inflation using the same weights as the Fed’s preferred metric, Canadian inflation would be at just 2.1% [year over year],” he said.