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Feb 22, 2013

Inflation drops to 3-year low in January

Lower gas prices, higher food prices
    
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(Reuters) — Canada's annual inflation rate in January dropped to a three-year low of 0.5 per cent from 0.8 per cent in December, largely due to lower gas prices, Statistics Canada said on Friday.

The rate is less than the 0.7 per cent predicted by market analysts and far lower than the Bank of Canada's 2.0 per cent target, offering further proof that the central bank is under no pressure to raise interest rates. The annual rate was the lowest since the 0.1 per cent recorded in October 2009.

The Bank of Canada's closely watched core rate, which excludes the prices of items such as energy, tobacco and some foodstuffs, slipped to one per cent from 1.1 per cent in December.

The main factor behind the drop in the all-items annual rate was gas prices, which fell by 1.8 per cent in the 12 months to January compared with a one per cent year-on-year increase in December. Excluding gasoline, annual inflation was 0.6 per cent.

Cheaper clothing also contributed to lower inflation, while the rise in food prices fell to 1.1 per cent from the 1.5 per cent advance seen in the 12 months to December.

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