Prices are on the rise in Canada, as more parts of the country plan to reopen. Consumer prices rose 3.4 per cent last month, the highest monthly increase in nearly a decade, Statistics Canada reported Wednesday. But while the headline inflation rate seems high, the agency said it would be temporary, with prices only appearing higher in comparison to a brief period of deflation last year.

Some key takeaways from StatCan’s report:

• Prices rose in every major component that the agency tracks.
• Shelter prices were up 3.2 per cent in April after rising 2.4 per cent in March, partly due to a strong housing market and rising costs of inputs like lumber.
• Transportation prices increased 9.4 per cent, mainly because of higher gasoline prices.

‘Base-year effect’: Statistics Canada attributed the larger headline figure in part to a “base-year effect.” Since prices declined in April 2020 when the pandemic had just begun, last month’s increase in prices looks even larger. This effect is particularly noticeable in energy: gasoline prices were 62.5 per cent higher last month than in April 2020, when global oil markets crashed and futures briefly turned negative. If you take out energy, last month’s price increase is much smaller, at just 1.6 per cent.

What economists say: Avery Shenfeld, CIBC’s chief economist, told BNN Bloomberg that there was no reason to be alarmed about the headline inflation figure. “If you compare to where prices were two years ago, actually inflation looks quite modest,” Shenfeld said. Still, Andrew Husby, an economist for Bloomberg Economics, said it could push policymakers toward a rate hike.

Why it matters: Base-year effect or not, investors are watching inflation closely. In recent weeks, as concerns about rising prices have mounted, markets have been volatile in assets like tech stocks and cryptocurrencies, both of which have soared since the start of the pandemic. The price of Bitcoin crashed Wednesday, falling as low as $37,315 before recovering to around $47,000 later in the day.