Reuters: US Dollar Report: UPDATE 1-Canada May inflation slows sharply, rates seen on hold

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UPDATE 1-Canada May inflation slows sharply, rates seen on hold Jun 22nd 2012, 12:44 Fri Jun 22, 2012 8:44am EDT * Annual inflation rate falls to 1.2 pct from 2 pct * Core rate 1.8 pct; ex-energy 1.7 pct * Cheaper gasoline main reason for decline OTTAWA, June 22 (Reuters) - Canada's annual inflation rate slowed more sharply than expected in May to 1.2 percent as gasoline prices tumbled on a year-on-year basis for the first time in almost two years, Statistics Canada said on Friday. Inflation, down from 2 percent in April, was below the 1.5 percent median forecast by analysts in a Reuters poll. But the closely watched core inflation rate, a better measure of underlying price trends because it excludes eight volatile items, stayed closer to the Bank of Canada's 2 percent target, easing to 1.8 percent in May from 2.1 percent in the previous month. Excluding energy only, the index rose 1.7 percent on the year compared with 2.1 percent in April, Statscan said. The softer inflation gives the central bank another reason to refrain from raising interest rates any time soon. In a speech on Thursday, central bank chief Mark Carney stuck to the message he has been giving since April - that a rate hike may be in the works. But market players doubt he is in any rush as the European debt crisis threatens to slow the pace of growth, and new government measures introduced on Thursday to curb heavy household borrowing could substitute for tighter monetary policy. [ID: nL1E8HLB49] The consumer price index (CPI) edged down 0.1 percent in May from April and the core CPI climbed 0.2 percent. Both had risen 0.4 percent in April. Gasoline prices fell 2.3 percent from May 2011. Other reasons for the lower inflation were a decline in clothing prices and slower price gains in passenger vehicles. Link this Share this Digg this Email Reprints

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