December 18, 2015 / 2:46 PM / 2 years ago

WRAPUP 1-Canadian inflation remains subdued; wholesale trade data weak

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OTTAWA, Dec 18 (Reuters) - Canada's annual inflation rate rose less than expected last month and wholesale trade data was surprisingly weak in October, suggesting the economy was struggling to gain momentum not long after emerging from recession.

The annual inflation rate rose to 1.4 percent as costs for food and shelter increased from a year before, but that was still a touch shy of economists' forecasts for a rise to 1.5 percent.

The subdued rate of inflation was likely to give the central bank plenty of room to keep interest rates low after it cut them twice this year to offset the impact of cheaper oil prices on Canada's resource-oriented economy.

Combined with an unexpected decline in wholesale trade in October, the data added to concerns for the health of the economy at a time when oil prices are falling once again.

The Canadian dollar weakened against the greenback immediately following the data, touching a fresh 11-year low.

Although Canada's economy grew in the third quarter after a mild recession in the first half of the year, early data indicates a weak start in the fourth quarter.

"It obviously points to slowing growth," Bipan Rai, director of foreign exchange strategy at CIBC Capital Markets, said of Friday's data.

"This obviously signals headwinds for the Canadian economy still to come."

Core inflation, which strips out volatile items and is closely watched by the Bank of Canada, dipped to 2.0 percent, which was also short of expectations.

The central bank has said a number of factors are having a temporary impact on inflation, including the drop in energy prices and the depreciation of the Canadian dollar.

While it is largely expected to hold its overnight interest rate steady at 0.50 percent when it next meets in January, traders notched up their bets of a rate cut next month to about a 17 percent probability after Friday's data.

Separate data showed wholesale trade declined 0.6 percent, thwarting economists' expectations for a gain of 0.1 percent, while September's figure was revised down to a decline of 0.3 percent from an initially reported 0.1 percent decrease.

Sales volumes for October also decreased 0.6 percent. Excluding motor vehicles, total sales fell 0.3 percent.

Additional reporting by Fergal Smith in Toronto; Editing by Paul Simao

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