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UPDATE 1-Canada Dec inflation remains at a three-year low of 0.8 percent
January 25, 2013 / 1:40 PM / in 5 years

UPDATE 1-Canada Dec inflation remains at a three-year low of 0.8 percent

* Benign inflation means no pressure for rate hikes

* Inflation rate well below central bank’s target

OTTAWA, Jan 25 (Reuters) - Canada’s annual inflation rate in December remained at a three-year-low of 0.8 percent, underlining how little pressure the Bank of Canada is under to raise interest rates, Statistics Canada data indicated on Friday.

The rate - the lowest since the 0.1 percent recorded in October 2009 - is far below the Bank of Canada’s 2.0 percent target. Market analysts had expected the rate to increase to 1.2 percent from November.

Food prices rose by 1.5 percent in the 12 months to December, down from the 1.7 percent year-on-year change in November. Gasoline prices rose by 1.0 percent in December, up from the 0.4 percent year-on-year advance seen in November.

The central bank’s closely watched annual core inflation rate, which strips out the prices of items such as gasoline and some foodstuffs, dropped to 1.1 percent from 1.2 percent in November.

The Bank of Canada on Wednesday cited soft inflation as one of the reasons why a rate hike would be less imminent than it has previously anticipated. A Reuters poll conducted later the same day showed most of Canada’s primary dealers expect the next rate hike in the first quarter of 2014.

Statscan said the annual average increase in consumer prices in 2012 was 1.5 percent, down from 2.9 percent in 2011 and the lowest since the 0.3 percent recorded in 2009. The average of the annual increases in the consumer price index since 1992 is 1.8 percent.

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