Ok so the headline is a total lie, there is no inflation as far as the eye can see. On Monday StatsCan published the data on Canadian inflation -- the trend is deceleration since early 2011.
Bottom line with or without Gasoline (the light blue line) there is no real inflation in Canada. The greatest price increases over the past year (all below 1.5%) are for food and alcohol. That's below the Bank of Canada's inflation target range. It also means that real interest rates are positive, making economic policy slightly more restrictive.
2013's dilemma for Canada has to be China's slowing economy. It was always ridiculous to think that China could continue to grow at 9-11% rate when Europe and North America (its primary markets) are facing stagnation. Many commentators imply that China can change its economic make up -- moving from an export orientated economy to one of consumption, the reality is that Chinese economic policy continues to favor investments: None of the tools (higher interest rates) are in place to ensure that the average Chinese can become part of the great consumer society.
Prices for energy, raw materials, and grains is also down -- there's a reason (aside from overpaying) for RioTinto to make additional $10 billion dollar provisions on their Alcan purchase; the price of aluminum is down, as is "king" copper (although not dramatically).
So there we are, Canada's economy (wide open to the world) is facing an economic slow down; the sequestration is certain to slow things down south of the border, Europe's government are compressing expenses -- with the obvious impact on GDP growth. Inflation is inexistant, and falling, and although the BoC's interest rate policies remain accommodative it is less so than it was even a few months ago. Its interesting to see the Bank of Japan (really the Japanese government) having installed a high inflation target for the country (with the obvious consequence of a falling Yen...), competitive devaluations seems to be the new game. Watch the Brits they too will look at that tool to ease economic pressures.
2013 will be very interesting.