UPDATE 2-Canada's annual inflation rate dips to 1.0 pct on cheaper gas

Fri Oct 23, 2015 8:57am EDT
 
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(Adds reaction, Canadian dollar)

By David Ljunggren

OTTAWA Oct 23 (Reuters) - Canada's annual inflation rate dipped to 1.0 percent in September on lower prices for gasoline, marking the 10th straight month it has been below the Bank of Canada's 2.0 percent target, Statistics Canada said on Friday.

A Reuters poll of analysts had predicted the annual rate would be 1.1 percent in September, following August's 1.3 percent rate.

Inflation has been anemic since late last year, when slumping prices for energy started to hit the Canadian economy.

Gasoline prices fell by 18.8 percent in the 12 months to September compared with a 12.6 percent decrease in August. The drop overwhelmed the rest of the index, even though seven out eight components posted an increase from September 2014.

Core inflation, which strips out volatile items and is closely watched by the Bank of Canada, advanced by 2.1 percent, the same as in August.

The Bank of Canada on Wednesday said what it calls the underlying inflation rate continued to be around 1.5 to 1.7 percent. It said total inflation would return to the 2.0 percent target in the first quarter of 2017.

Scotiabank economist Derek Holt predicted "the forces weighing against headline inflation will prove transitory", in particular citing the decline in gas prices.   Continued...