Canada prices tip lower on lower gas prices

Fri Oct 16, 2009 8:00am EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian consumer prices fell in September from a year earlier due largely to tumbling gasoline prices and while there was other evidence of emerging inflation pressures, it was not expected to be of concern to the Bank of Canada.

The mixed results ruled out any specter of either prolonged deflation or unruly price pressures, permitting the central bank to hold the line on interest rates next Tuesday and repeat its conditional pledge that rates will stay unchanged at 0.25 percent through mid-2010.

"Frankly, I don't think it really moves the needle for the Bank of Canada," said Doug Porter, deputy chief economist at BMO Capital Markets.

"The monthly core number looks a tad higher than expected but really this is pretty much within the range of expectations," he said.

The consumer prices index was unchanged in September from August and was down 0.9 percent in the 12-month period. Markets had expected a 0.8 percent drop.

Core inflation, which strips out energy and other volatile items for a more accurate portrayal of price pressures, rose 0.3 percent on the month and 1.5 percent on the year, topping forecasts of a 1.4 percent rise for the year.

Excluding energy, the CPI rose 1.3 percent.

The Canadian dollar weakened following the report, trading   Continued...

<p>An employee fills a vehicle at a gas station in Changzhi, Shanxi province December 31, 2008. REUTERS/Stringer</p>