Inflation in Canada rose above the Bank of Canada's comfort level last month as higher prices for gasoline and food pushed the rate up four notches to 3.1 per cent, Statistics Canada reported Wednesday.

The surprisingly strong gain in the cost of consumer goods reverses a recent trend towards more moderate inflation, which had seen the rate fall from 3.7 during May to 2.7 in July.

On a month-to-month basis, prices rose 0.3 per cent from July to August.

Core or underlying inflation, which excludes volatile items such as energy and some foods, also saw a sizable increase to 1.9 from 1.6 per cent, pushing close to the central bank's two-per-cent target.

Gasoline and food, two items that constitute significant portions of household spending, continue to be big drivers of annual inflation. Gasoline was 22.8 per cent more expensive last month than in August 2010, food cost 4.4 per cent more, and food bought at grocery stores was five per cent higher.

In a speech Tuesday, Bank of Canada governor Mark Carney said he was not concerned about inflation and would not raise interest rates to deal with the issue. The bank's mandate is to keep consumer prices within a range of one and three per cent, and as close to two as possible.

With the global economy entering what the International Monetary Fund called a "new dangerous phase," most analysts agree that inflation will moderate as demand diminishes.

But at the moment Canada is getting the worst of both scenarios — stubbornly high inflation and a slowing economy.


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