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Jan 25, 2013

December inflation remains at a 3-year low of 0.8 per cent

Rate comes in well below forecasters' predictions
    
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OTTAWA (Reuters) - Canada's annual inflation rate in December remained at a three-year low of 0.8 per cent, underlining how little pressure the Bank of Canada is under to raise interest rates, Statistics Canada data indicated on Friday.

The rate - the lowest since the 0.1 per cent recorded in October 2009 - is far below the Bank of Canada's 2.0 per cent target. Market analysts had expected the rate to increase to 1.2 per cent from November.

Food prices rose by 1.5 per cent in the 12 months to December, down from the 1.7 per cent year-on-year change in November. Gasoline prices rose by 1.0 per cent in December, up from the 0.4 per cent year-on-year advance seen in November.

The central bank's closely watched annual core inflation rate, which strips out the prices of items such as gasoline and some foodstuffs, dropped to 1.1 per cent from 1.2 per cent in November.

The Bank of Canada on Wednesday cited soft inflation as one of the reasons why a rate hike would be less imminent than it has previously anticipated. A Reuters poll conducted later the same day showed most of Canada's primary dealers expect the next rate hike in the first quarter of 2014.

Statistics Canada said the annual average increase in consumer prices in 2012 was 1.5 per cent, down from 2.9 per cent in 2011 and the lowest since the 0.3 per cent recorded in 2009. The average of the annual increases in the consumer price index since 1992 is 1.8 per cent.

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