* Inflation well below Bank of Canada's 2 percent target
* Bank not expected to raise rates until second half of 2014
* Wholesale sales unexpectedly remain flat
By David Ljunggren
OTTAWA, April 19 Canada's annual inflation rate
in March slowed to 1.0 percent from 1.2 percent in February,
further underlining how little pressure there is on the Bank of
Canada to raise rates any time soon.
The main reason for the drop in the annual rate was lower
gas prices, Statistics Canada said on Friday. The March rate was
slightly less than the 1.1 percent predicted by economists.
The Bank of Canada - which has kept its overnight lending
rate at a near record low since September 2010 - this week said
it did not expect inflation to hit its 2 percent target until
mid-2015. The central bank is not expected to raise rates until
the second half of 2014.
"After quite a bit of volatility in the prior few months,
Canadian inflation has shown its true colors a little more
clearly this month - and those colors are pretty bland," said
Doug Porter, chief economist at BMO Capital Markets.
"Inflation, like growth, is at the very low end of what the
Bank of Canada is comfortable with."
The Canadian economy is struggling to cope with weak
foreign markets and a strong domestic dollar. The Bank of Canada
central bank this week also cut its economic forecasts on signs
of a slackening economy.
Gasoline prices in the year to March fell by 0.3 percent
after rising 3.9 percent in the 12 months to February. Food
prices grew by 1.8 percent in the year to March, down from the
1.9 percent recorded in February.
The Bank of Canada's closely watched core rate, which strips
out volatile prices of energy and some foodstuffs, stayed
unchanged at 1.4 percent.
"The key take-away here is that growth has disappointed,
slack is quite material and that in turn will help keep
inflation pressures very much benign over the next several
quarters," said TD Securities macro strategist Mazen Issa."
After the figures were released the Canadian dollar remained
steady at C$1.0260 to the U.S. dollar, or 97.47 U.S. cents. It
later strengthened slightly and by 10:05 a.m. (1405 GMT) was at
$1.0252, or 97.54 U.S. cents.
Overnight index swaps, which trade based on expectations for
the central bank's key policy rate, showed that after the
announcement traders trimmed their very small bets on an
interest rate cut later this year.
"Certainly these low inflation readings argue for the bank
to keep policy highly accommodative, to try to get a bit more
momentum into the economy," said Paul Ferley, assistant chief
economist at the Royal Bank of Canada.
Separately, Canadian wholesale trade unexpectedly remained
flat in February from January, held back by lower sales of
machinery, equipment and supplies.
Market operators had expected a 0.4 percent increase.
Statscan revised January's advance to 0.5 percent from an
initial 0.3 percent. The volume of sales remained stable.
In February there were decreases in five of the seven
subsectors, representing about 70 percent of wholesale trade.
Wholesalers in seven of Canada's 10 provinces reported higher
sales, but these were offset by a 1.1 percent drop in Ontario,
the largest province.