Canada's inflation rate increased by 0.2 percentage points to an annual rate of 0.9 per cent in November, in part because of higher gasoline and other energy costs.

Statistics Canada reported Friday that while it increased slightly from a 0.7 per cent annual rate the previous month, Canada's inflation rate stayed below the one per cent threshold for the seventh month out of the last 13.

Historically, that's a very low inflation rate. The Bank of Canada is mandated to set interest rates with a view to keeping the inflation rate between one and three per cent.

Gas, electricity cost more

Energy costs increased 2.3 per cent in November, a reversal from the 1.6 per cent decline in October.

Within the energy sector, gasoline prices increased by 0.4 per cent. But that's a major flip from the 4.3 per cent decline seen the previous month.

Electricity prices rose 5.1 per cent, led by an 8.1 per cent increase in Ontario. Natural gas prices advanced 5.3 per cent in the 12 months to November.

"We still expect inflation to drift higher going forward ... however, the pace of increase is likely to be modest and we do not assume that core ... inflation will reach the mid-point of the Bank’s target range until late in 2015," Royal Bank economist Nathan Janzen said in a note.

The price of food is a wild card for consumers.

While dairy and egg products fell in price and an overall food basket rose by just one per cent year over year in November, some food items are soaring in price.  

Meat prices rose 1.8 per cent, fish and seafood prices were up 4.7 per cent and prices for vegetables increased 8.6 per cent. 

Inflation 'a weak spot'

Diana Petramala, an economist for TD Bank, said weak inflation numbers are now “front and centre” as a concern for the Bank of Canada.

Like the U.S. Federal Reserve, Canada’s central bank is aiming for a target inflation rate of around two per cent, which would indicate a stronger economy.

“Canadian inflation remains a weak spot among a number of improving economic indicators,” Petramala said in a note to investors.

She noted that the Bank of Canada's core measure (which excludes the eight most volatile components, including energy), rose by just 1.1 per cent, following a 1.2 per cent gain in October.

“Inflation is a lagging indicator, and the benign inflationary environment is likely a consequence of the slow pace of economic growth experienced through late 2012 and early 2013,” she said.

But the outlook for next year is better.

“As we head into the new year, the signs are beginning to point to a modest uptick in inflation. The economy picked up steam in the second half of this year and slack is being absorbed — slowly but surely,” she added.