* Annual inflation rises from 0.7 pct in May as expected * Core rate hits 1.3 pct vs 1.1 pct in May * Gasoline, vehicles, shelter main contributors to rise * Analysts see no change in Bank of Canada stance By Louise Egan OTTAWA, July 19 (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. The bank said on Wednesday it would keep its benchmark lending rate unchanged at 1 percent as long as "the inflation outlook remains muted," the economy has significant slack and household debt stays under control. The bank sees total CPI inflation of 0.7 percent and core inflation of 1.1 percent in the second quarter, according to its quarterly estimates released on Wednesday. Both measures will rise to 2 percent by mid-2015, it said. In the 12 months to June, transportation costs accelerated as gasoline prices jumped 4.6 percent and car prices rose 2 percent, Statscan said. Both items had fallen in May. Prices rose in six of the eight major components of the CPI in the year, with declines in health and personal care as well as in recreation, education and reading. After his first rate decision this week, new Bank of Canada Governor Stephen Poloz maintained the message delivered by his predecessor Mark Carney that the bank's next move on rates would be a hike, not a cut. But he made clear no such move is imminent. Market players don't expect rates to rise until the fourth quarter of 2014.