Canada inflation tamer in July on energy, clothing

Fri Aug 17, 2012 11:02am EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian core and headline inflation were both tamer than expected in July, bolstering expectations the Bank of Canada will leave interest rates at near-record lows well into 2013.

Consumers paid less for clothing and fuels such as gasoline and natural gas in July than they did a year earlier, pushing the annual inflation rate down to 1.3 percent from 1.5 percent in June, Statistics Canada said on Friday.

The core inflation rate, which excludes gasoline and other volatile items, softened to 1.7 percent from 2 percent.

Canada's economy is on track for modest growth this year, but the lack of inflationary pressure combined with global uncertainty means there is little pressure for the central bank to withdraw stimulus as it has pledged to do.

"It was really soft right across the board ... All in all, inflationary pressures in Canada appear well contained at this point," said Camilla Sutton, chief currency strategist at Scotiabank.

Core inflation is below the central bank's estimated 1.9 percent for the third quarter, noted Sal Guatieri, senior economist at BMO Capital Markets.

"It possibly pushes out Bank of Canada rate hike expectations, but no one expects the bank to raise rates anytime soon," he said.

Analysts had expected overall inflation of 1.5 percent and core inflation of 2.0 percent, the same rates as in June.   Continued...