Canada's annual inflation rate in July remained at 2.2 per cent for the fourth month in a row, Statistics Canada reported Tuesday.

Much of the year-over-year rise in the consumer price index was because of higher accommodation costs, as housing prices and mortgage rates increased.

Lower prices for gasoline and natural gas mitigated the annual rise in the cost of living, Statistics Canada said.

The core rate of inflation — which excludes the more volatile items like gasoline and tobacco — moderated to 2.3 per cent from 2.5 per cent in June. That was in line with analysts' forecasts.

The core rate is still higher than the Bank of Canada's two per cent target rate. But it is moderating, and analysts say that will give the central bank room to leave its key lending rate unchanged at its next policy meeting on Sept. 5.

"Any thoughts the bank had earlier of tightening another notch at its September rate setting have likely been put on ice in the wake of continuing turbulence and uncertainty, as investors continue to gauge the fallout from the U.S. subprime meltdown and unsettled conditions in the commercial paper market," said CIBC World Markets senior economist Peter Buchanan.

But TD economist Beata Caranci said the current turmoil in the financial markets could end soon, leaving the Bank of Canada facing some persistent inflationary pressures.

"If recent central bank moves to prop up liquidity prove successful in returning stability to financial markets and easing credit constraints, the central bank could very well return to the table with a [quarter percentage point] rate hike on Oct. 16," she wrote.     

Alberta again led all provinces with an annual inflation rate of five per cent. But that was a marked slowdown from the 6.3 per cent rate in June, as the rate of increase in Alberta's soaring home prices eased.

Consumer prices edged up by just 0.1 per cent between June and July, Statistics Canada said. Higher prices for women's clothing, hotel and motel rates, and higher mortgage rates provided the upward pressure on the CPI, while lower prices for cars, natural gas and fresh vegetables provided some downside relief.