Canadian consumer prices fell in August at their second-fastest annual rate in over 50 years, suggesting the Bank of Canada can comfortably hold interest rates at a record low without fear of inflationary pressure.
Prices fell by 0.8 percent in August compared with a year earlier, the second-largest 12-month drop in over 50 years, dragged down by falling gasoline prices, Statistics Canada said on Thursday.The consumer price index had slid 0.9 percent at an annual rate in July, which was the sharpest since 1953 when the CPI fell 1.4 percent.Prices were unchanged in the month as fuel price hikes offset a slump in fresh fruit and vegetables, Statscan said. Energy prices fell 19.1 percent in the year to August but climbed 2.3 percent in August from July. Analysts in a Reuters poll had forecast a 0.1 percent monthly rise in the index and a decline of 0.7 percent annually.
Core inflation, closely monitored by the Bank of Canada because it excludes volatile items like gasoline and some foods, met expectations by inching up 0.1 percent on the month and 1.6 percent year-on-year. The central bank targets 2 percent inflation and has said it expects both core CPI and overall CPI to hit that target by mid-2011. Analysts said the report confirmed their expectations that prices pressures will not be a major concern as the economy recovers from a deep recession.
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