TORONTO (Reuters) - Canada’s annual inflation rate accelerated to 1.0% in January, up from a year-over-year increase of 0.7% in December, on higher prices for durable goods and gasoline, Statistics Canada said on Wednesday. Analysts polled by Reuters had expected the annual rate to rise to 0.9% in January. STORIES: Market reaction: CAD/ Link: here COMMENTARY ROYCE MENDES, SENIOR ECONOMIST, CIBC CAPITAL MARKETS “Higher gasoline prices drove some of the gains in the headline index. But a rebound in durable goods following greater than usual holiday discounts also added upward pressure on inflation in January. Pockets of weakness were, however, still evident, with prices for hard-hit services such as airline fares falling further during the month.” “Headline inflation is likely to rise above the Bank of Canada’s 2% target in the months to come, but that will simply be the temporary effect of comparing this year’s prices to the very weak levels that prevailed during the worst of the first virus wave twelve months earlier. The central bank will look through that increase and focus on all the ways COVID-19 is still battering the Canadian economy.” DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS “Coming at a time when the market is becoming increasingly sensitive to any signs of inflation, this high side surprise has put further upward pressure on yields in Canada.” “I think it is important to point out that there is still really nothing going on at the core level, still very modest numbers overall ... The big picture is that core inflation is quite sticky around 1.5%.” “In the next few months with the run up in oil prices in particular and other commodities and when we compare ourselves to what happened a year ago, we are going to get some very big inflation numbers in coming months, so I think this is just an opening salvo in terms of what we are about to see for headline inflation.” DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS, SCOTIABANK “I’d put more emphasis on a little bit weaker core inflation than the pop in the headline. It’s still backward-looking. We know that we’re getting towards the bottom of a cycle if we’re not there already. Their (Bank of Canada’s) greater concern should be about inflation outlook.” “For the next couple years, or so, we expect the core inflation to get back up to the bank’s 2% target, and slightly exceed it by the time we’re in 2022. So, that’s within the monetary horizon of the central bank, which is why I say ignore the backward-looking inflation reading for January.”