UPDATE 2-Canadian inflation holds steady at 1.9% in October, remains on target

(Adds analysts reaction, C$)

OTTAWA, Nov 20 (Reuters) - Canada’s annual inflation rate held steady in October at 1.9% as expected, Statistics Canada said on Wednesday, marking the third straight month of little change.

Analysts in a Reuters poll had forecast an annual inflation rate of 1.9%. Prices for goods, Statistics Canada said, rose 1.3% year-over-year in October, while prices for services increased by 2.2%.

“This one was about as close to expectations as we’re going to get for an inflation report,” said Doug Porter, chief economist at BMO Capital Markets, noting Canadian inflation remained on target, unlike in many other countries.

The Bank of Canada - which has sat on the sidelines in terms of monetary policy since October 2018 even as many of its counterparts, including the U.S. Federal Reserve, have eased - held its overnight interest rate as expected last month, but left the door open to a possible cut over the coming months.

“The bank doesn’t have a free pass to cut rates,” Porter said on Wednesday.

The Canadian dollar declined to C$1.3289 to the U.S. dollar, or 75.25 U.S. cents, after the inflation data.

Simon Harvey, a forex market analyst for Monex Europe and Monex Canada, said economic data was unlikely to be the dollar’s main driver, unless there was a substantial downturn.

“It will be central bank policy, current account dynamics and definitely what happens with the U.S.-China trade (conflict),” he said.

Statistics Canada said consumer prices for gasoline fell 6.7% year-over-year in October following a 10.0% decline in September, despite a slight increase in prices on a monthly basis, because of temporary supply disruptions in the Middle East and lower U.S. crude inventories.

“Heading into the turn of the year, the lapping of weak gasoline prices from a year ago could see headline inflation accelerate a bit, but that shouldn’t have many implications for underlying price pressures,” said CIBC’s Royce Mendes.

Fresh fruit prices jumped 7.9% on an annual basis, compared with a 2.0% increase in September, and outpaced fresh vegetables, which surged 7.5% as supply pressures caused by adverse weather eased.

Prior to the October data, fresh vegetable price gains had been above 10% for 12 consecutive months.

CPI common, which the central bank says is the best gauge of the economy’s underperformance, was at 1.9%. CPI median, which shows the median inflation rate across CPI components, was at 2.2%, while CPI trim, which excludes upside and downside outliers, was at 2.1%.

Reporting by Kelsey Johnson; Additional reporting by Steve Scherer in Ottawa and Fergal Smith, Moira Warburton in Toronto; editing by Steve Orlofsky and Bernadette Baum