Canada June inflation rises to 1.2 percent, still tame

Fri Jul 19, 2013 9:45am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's annual inflation rate rose in June for the second straight month to 1.2 percent after hitting a 3-1/2-year low in April, but price pressures remained muted as the central bank signaled an extended pause on interest rates.

The consumer price index (CPI) was unchanged in the month, Statistics Canada said on Friday, but the year-on-year rise in transportation, shelter and food pushed up annual inflation from 0.7 percent in May. Inflation bottomed out in April at 0.4 percent.

Core CPI, which excludes gasoline and some other volatile items, fell 0.2 percent in the month but quickened to a 1.3 percent annual rate compared with 1.1 percent the previous month.

Both annual rates came in exactly as forecast, although on a monthly basis analysts in a Reuters poll had expected a 0.1 percent rise in total CPI and a 0.1 percent drop in core CPI.

"Inflationary pressures are really absent, there's really no inflation to talk about," said Carlos Leitao, chief economist at Laurentian Bank of Canada in Montreal.

Leitao said the data would not change the Bank of Canada's accommodative stance on monetary policy. "If anything it will confirm to them that their current stance is appropriate."

The Canadian dollar slipped after the data to a session low of C$1.0390 to the U.S. dollar, or 96.25 U.S. cents, marginally softer than just before the news and weaker than Thursday's close at C$1.0376, or 96.38 U.S. cents.

With inflation at the lower end of the Bank of Canada's target range of 1-3 percent, the central bank is unlikely to follow through any time soon on its pledge of eventual interest rate hikes.   Continued...

A woman carries shopping bags during the Christmas shopping season in Toronto, December 7, 2012. REUTERS/Mark Blinch