Canadians are beginning to feel the effects of higher prices as the annual pace of inflation surged to 2.4%. It’s now at its highest rate in nearly two years, which is being fuelled by higher costs at the gas pumps, the grocery store, and surging clothing costs.

Much of the bump came as concerns about events in the Middle East helped pushed gas prices up 11.2 percent compared with January 2019, when a global supply glut lowered oil prices.

Statistics Canada said Wednesday excluding gasoline, the year-over-year inflation rate would have been 2 percent in January.

The Canadian central bank has left the door open to a rate cut to stimulate growth – and consumer spending – if it sees an economic slowdown that is more persistent than expected.

The overall increase in prices of 2.4 percent compared with a year ago was also driven by increased mortgage interest costs, purchases of passenger vehicles, auto insurance premiums, and a bump in rents.

With Canadians being one of the most indebted countries on earth, it seems a rate cut is coming. With an expected Federal Reserve rate cut coming this month, there is a strong chance Canada takes the lead on this. Investors are placing 80 percent odds of a cut on Wednesday, in a decision due at 10 a.m. in Ottawa. That’s a sudden change from a week ago when markets were placing just a 20 percent bet on Poloz easing. With the market turmoil on Friday, there might be a collaborative effort from central banks to begin to ease.

The Governor of the Bank of Canada is due to speak on Thursday at 1 p.m. in Toronto and could take the opportunity to elaborate on the central bank’s thinking.