Inflation eases in March, core higher

Fri Apr 17, 2009 9:22am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's annual inflation rate slowed more than expected in February to 1.2 percent on falling gasoline and car prices, but the core rate closely watched by the central bank rose to 2 percent.

The data, released by Statistics Canada on Friday, did little to change expectations that the Bank of Canada will soon start taking additional measures beyond interest rate cuts to stimulate the sagging economy.

The Canadian dollar was slightly weaker at C$1.2104 to the U.S. dollar, compared with around C$1.2095 before the data.

The consumer price index climbed 0.2 percent in the month while the core index, which excludes volatile items and is a better gauge of underlying price trends, rose 0.3 percent.

"A little bit faster on the core side, I thought there would be more dampening pressure," said Michael Gregory, senior economist at BMO Capital Markets.

Analysts in a Reuters poll had expected a 0.3 percent rise in CPI in March and a 0.2 percent rise in core CPI.

In the 12-month period, consumers faced rising prices for food and shelter costs but those were partially offset by a decline in transportation costs, most notably for gasoline and the leasing and purchase of passenger vehicles.

Inflation in the first quarter was in line with the Bank of Canada's projection of 1.2 percent.   Continued...