Canada's inflation rate drops to 1.5% on cheaper gasoline
Excluding gas prices, annual CPI rate would have increased to 2.3%, StatsCan says
Canada's annual inflation rate slowed to 1.5 per cent in December, down from two per cent in November, as the plunging price of gasoline again helped to rein in the cost of living.
The inflation rate hasn't been that low since March.
Statistics Canada attributed the lower rate mostly to an almost 17 per cent drop in pump prices.
To underline that point, the agency reported that if gas prices are excluded from its calculation, the annual consumer price index (CPI) rate would have increased to 2.3 per cent.
Consumer prices rose in seven of the survey's eight major categories, with only transportation declining.
Gasoline prices across the country are continuing their drop this month.
The latest weekly survey from Calgary-based MJ Ervin & Associates showed the average price for a litre of regular gas was 91.3 cents a litre as of Tuesday. A year ago, it was $1.34. That will put further downward pressure on overall inflation.
January's CPI figures will be released Feb. 26.
Inflation to fall further
The Bank of Canada said the slumping oil price was the main reason behind the surprise interest rate cut Wednesday.
The central bank said lower crude prices posed a threat to economic growth and its inflation target. It forecast that the country's annualized inflation rate would drop to just 0.3 per cent in the second quarter.
Statistics Canada said the cost of living in December rose year over year in every province except Prince Edward Island, where the CPI fell 0.4 per cent.
The core inflation rate, which excludes such volatile items as gasoline, rose slightly to 2.2 per cent year over year. It had been 2.1 per cent in November.
"Looking past the dramatic dive in gasoline prices, there is precious little indication that underlying Canadian inflation trends are being dragged down by the plunge in oil prices," said BMO chief economist Douglas Porter in a commentary.
"On the contrary, core inflation appears pegged above the two per cent threshold for some time yet, especially with the upward pressure from a weakening exchange rate."