OTTAWA (Reuters) - Canada’s annual inflation rate edged up in June, but cheaper energy prices helped keep it at the lower end of the central bank’s target range, data from Statistics Canada showed on Friday.
Annual inflation was 1 percent last month, up from 0.9 percent in May and in line with analysts’ forecasts. The increase was led by higher prices for food and shelter.
But core inflation, which strips out volatile items and is closely watched by the Bank of Canada, was less subdued at 2.3 percent, up from 2.2 percent in May.
The Bank of Canada, which cut rates on Wednesday to combat a struggling economy, sees the effects of a weaker currency and some sector-specific factors as temporarily boosting the core rate.
The bank has estimated that the underlying trend in inflation is 1.5 percent to 1.7 percent.
“For the Bank of Canada, this is still a secondary concern for them. They have definitely made up their own perspective in terms of where they see underlying inflation,” said David Tulk, chief Canada macro strategist at TD Securities.
The bank has a target range of 1 percent to 3 percent for inflation.
The report helped send the Canadian dollar CAD=D4 to a six-year low against the greenback. Investors were also taking in inflation data from south of the border. [CAD/]
Economists said the report did not alter their view of monetary policy.
A recent Reuters poll showed the bank is expected to hold rates at 0.5 percent until it raises them at the end of 2016. Markets are pricing in about a 17 percent chance of another cut at the bank’s next meeting in September. [CA/POLL]BOCWATCH
While the impact of energy was less pronounced than in recent months, cheaper prices continued to weigh on the overall inflation rate, with the energy index tumbling 9 percent in the 12 months to June. Excluding energy, inflation was 2.1 percent.
Consumers paid 3.4 percent more for food than the same period a year earlier. Prices for food bought in stores were up 3.6 percent, due to the higher cost of meat.
Prices rose in seven of the eight major categories. Transportation, which includes gasoline, was the only component to fall.
Additional reporting by Allison Martell in Toronto; Editing by Meredith Mazzilli