Statistics Canada says the annual inflation rate reached 1.3 per cent in December, its highest level since last February.

Gasoline prices were the main reason for the increase in the consumer price index as they jumped an average 25.6 per cent from December 2008.

"Just as energy prices were the largest contributor to negative inflation in the summer months, they are now the largest inflationary pressure," TD economist Diana Petramala said in a research note.

On a seasonally adjusted month-to-month basis, the CPI fell 0.1 per cent from November to December. That followed a 0.5 per cent rise in November. The seasonally adjusted monthly CPI has gone up in six of the past eight months.

The core inflation rate — which excludes volatile items such as food and energy and helps the Bank of Canada set policy decisions — advanced 1.5 per cent over the 12 months to December, matching the increase in November.

The seasonally adjusted monthly core index went up 0.1 per cent from November to December. That followed a 0.2 per cent increase in November.

"December’s report underscores the belief that inflationary pressures remain muted," Petramala said.

"We expect headline and core inflation to remain well below 1.5 per cent through 2010, and only gradually rise to the Bank of Canada’s two per cent target by the beginning of 2012."

For 2009 as a whole, consumer prices rose by 0.3 per cent, a significantly smaller rise than the 2.3 per cent rise posted in 2008. The annual inflation rate in 2009 was the lowest since 0.1 per cent in 1994.