January 20, 2017 / 1:43 PM / a year ago

UPDATE 1-Canada Dec annual inflation rises less than expected as food falls

(Adds details from report)

OTTAWA, Jan 20 (Reuters) - Canada’s annual inflation rate rose less than expected in December as cheaper food costs offset higher gasoline prices, data from Statistics Canada showed on Friday, leaving inflation below the Bank of Canada’s target.

The annual inflation rate rose to 1.5 percent from November’s 1.2 percent, short of analysts’ forecasts for an increase to 1.7 percent.

Gasoline prices jumped 5.5 percent compared to the year before. But annual food prices fell for the third month in a row and were down 1.3 percent in December as Canadians paid less for fresh fruit and vegetables.

Two of the three new measures of core inflation the Bank of Canada established late last year showed underlying inflation was closer to the central bank’s 2 percent target.

CPI median, which shows the median inflation rate across CPI components, held at 2.0 percent after the previous month was revised up, while CPI trim, which excludes upside and downside outliers, was also steady at 1.6 percent.

But CPI common, which the central bank has said has the best correlation to the output gap, was furthest away from target, edging up to 1.4 percent from 1.3 percent. Common measures price changes across categories in the CPI basket.

Reporting by Leah Schnurr; Editing by Bernadette Baum

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