(Corrects final paragraph to show food prices grew 1.6 percent
in September year-on-year, not 1.2 percent.)
* 12-month gains in gasoline and electricity prices slower
* Prices rise in all CPI components except clothing,
* Core inflation unchanged from September at 1.3 pct
* Bank of Canada to stay on sidelines - economic analyst
OTTAWA, Nov 23 Canadian inflation was slightly
stronger than expected in October as prices rose for almost all
consumer items, but the rate remained well below the central
bank's 2 percent target, suggesting interest rate hikes are
still a long way off.
Gasoline and electricity prices grew at a slower
year-on-year pace than in September while prices for food, air
travel and property taxes rose more sharply, Statistics Canada
said in a report on Friday.
Annual inflation held steady at 1.2 percent, unchanged from
September but above the 1.1 percent forecast by market players.
The consumer price index rose 0.2 percent in October from
Core inflation, which strips out gasoline and other volatile
items, was unchanged from September at 1.3 percent year-on-year.
Market players had forecast 1.2 percent core inflation.
With price pressures holding below 2 percent since March,
there is little pressure on the Bank of Canada to follow through
on its warning that it may need to raise interest rates, a
stance that has made it an outlier among major economies.
"It doesn't really change the story - it's really limited
inflation pressure in Canada," said Sal Guatieri, senior
economist at BMO Capital Markets.
"It just reinforces the view that the Bank of Canada will
remain on the sidelines for some time," he said.
Canada's primary securities dealers expect the bank to begin
tightening monetary policy in the fourth quarter of next year,
according to a Reuters poll last month.
But markets continue to price on a slight chance of a rate
cut next year, according to yields on overnight index swaps
which trade based on expectations for the policy rate.
The Canadian dollar firmed to a session high after
the report to C$0.9965 to the U.S. dollar, or $1.0035, compared
to C$0.9970, or $1.0030, just before the release and C$0.9972,
or $1.0028 at Thursday's North American close.
Prices rose in all major components except clothing and
footwear, Statscan said.
But energy prices helped keep inflation low as gas prices
rose 4 percent in the year to October, easing from 4.7 percent
in September. Electricity price gains slowed to 1.7 percent
year-on-year from 6 percent. Natural gas fell 11.6 percent after
decreasing 14.2 percent in the previous month.
Upward pressure on inflation came from food prices, which
jumped 2 percent from a year earlier compared with 1.6 percent
in September versus September 2011. Year-on-year price growth
also sped up for air travel and property taxes.
(Additional reporting by Alex Paterson and Allison Martell;
Editing by Grant McCool and Kenneth Barry)