January 18, 2013 / 9:50 PM / 6 years ago

Canada December inflation back in Bank of Canada band, barely

A sign framed by maple leaves is pictured in front of the Bank of Canada building in Ottawa July 17, 2012. REUTERS/Chris Wattie

OTTAWA (Reuters) - Canadian inflation probably moved back into the Bank of Canada’s target range in December, but only barely, with price pressures subdued, a Reuters survey of analysts showed on Friday.

The median forecast is for annual inflation of 1.2 percent after November’s surprise showing of 0.8 percent. The Bank of Canada tries to keep inflation at 2 percent and in any case between 1 and 3 percent.

Economists saw prices falling 0.2 percent in December partly because of cheaper gasoline and excess capacity. Inflation is also usually more subdued in December. The headline number is not adjusted for seasonal factors.

“Soft inflation is consistent with the recently widening output gap and strong C$. Until either of those factors dissipate, price pressures are likely to remain very tame,” BMO Capital Markets senior economist Benjamin Reitzes said.

The numbers come two days after the Bank of Canada’s interest rate decision and quarterly Monetary Policy Report, but it is clear that while the central bank may officially keep its tightening bias in place, any price pressures it might feel are minimal.

The median forecast among 12 primary dealers surveyed by Reuters is for the next rate hike to be either in the fourth quarter of 2013 or the first quarter of 2014. <CA/POLL>

The core inflation numbers, which exclude volatile items and which the central bank looks to in the short term, shows an annual rate of 1.4 percent, up from 1.2 percent in November, with prices falling 0.2 percent month on month from November.

Reporting by Randall Palmer; Editing by Diane Craft

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