Canada April inflation well under forecast, Bank of Canada range

Lower gas, car prices lead to 0.6 per cent decrease
|payroll-reporter.com|Last Updated: 05/17/2013

(Reuters) — Cheaper gasoline and cars helped Canada's annual inflation rate fall dramatically in April to 0.4 per cent from one per cent in March, below expectations and well outside the Bank of Canada's target range of one to three per cent. It was the lowest since 0.1 per cent in October 2009.

Prices fell by 0.2 per cent on a monthly basis from March to April. Core inflation, which excludes gasoline and other volatile items, dropped to 1.1 per cent from 1.4 per cent in March; on a monthly basis core prices rose 0.1 per cent, Statistics Canada said on May 17.

The weak inflation data underlined how little pressure there is on the Bank of Canada to raise interest rates, despite its insistence that the next move will be up. The central bank said last month it did not expect overall or core inflation to return to the two per cent target before the mid-2015.

The median forecast in a Reuters survey of analysts was for 0.6 per cent annual inflation, with no change in prices between March and April; only one of 24 analysts had forecast an annual rate as low as 0.4 per cent. For core, the median forecast was 1.2 per cent annually and 0.2 per cent on a monthly basis.

Gasoline prices fell six per cent from a year earlier, the largest decline since October 2009. Excluding gasoline, annual inflation fell to 0.8 per cent in April from 1.1 per cent in March. The price of passenger vehicles also fell 0.7 per cent from April 2012.

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