Canada's annual inflation rate edged down to 2.2 per cent in April from 2.3 per cent the month before, Statistics Canada reported Thursday.

Analysts had expected inflation to come in a touch lower at 2.1 per cent.

But the core inflation rate — which excludes volatile items in the consumer price index — rose to 2.5 per cent from 2.3 per cent in March. That's its highest level in more than four years.

Analysts noted that the upward pressure on core inflation was broadly based, suggesting that interest rate hikes may come later this year.

"The Bank of Canada … will probably be forced to acknowledge the growing upside risk to inflation with an eye to possible rate hikes in the future," said TD economist David Tulk.

The Canadian dollar jumped almost half a cent to 91.05 cents US in late morning trading.

The year-over-year rise in the cost of living was driven by increases in housing costs, as prices for new homes rose and consumers paid more in mortgage interest.

Gasoline, for once, wasn't a major culprit in the annual inflation rate, as prices at the pump were actually lower in April than they were a year earlier.

Natural gas was also cheaper year-over-year, as were computers and video equipment.

Food, however, cost more. Consumers paid 3.8 per cent more for food than they did in April 2006. Fresh vegetables were 12.9 per cent more expensive.

Alberta's housing boom once again gave it the dubious honour of having the highest inflation rate in the country — 5.5 per cent. Homeowners' replacement costs in that province have shot up by more than 29 per cent in the past year.

On a month-over-month basis, prices rose 0.4 per cent from March to April — a marked slowdown from the 0.8 per cent rise seen in the previous month.

Prices for gasoline and natural gas rose in April; prices for non-alcoholic beverages and women's clothing fell.