OTTAWA (Reuters) -Canada’s annual inflation rate unexpectedly dropped by a tick to 1.9% in November, driven by a broad-based slowdown in prices, while the consumer price index was unchanged on a monthly basis, data showed on Tuesday.
Analysts polled by Reuters had forecast that inflation would hold steady at the 2% rate recorded in October and the consumer price index would rise 0.1% month over month.
Prices for travel tours and mortgage interest costs contributed the most to the deceleration in the annual inflation rate, Statistics Canada said.
The Canadian central bank’s preferred measures of core inflation, CPI-median and CPI-trim, were unchanged, though the previous month’s data were revised up by a notch.
CPI-median – or the value at the middle of the set of price changes in a month – remained at 2.6%, and CPI-trim – which excludes the most extreme price changes – stayed at 2.7%.
Tuesday’s data was the first of two inflation reports the Bank of Canada will get to assess before its next rate decision on Jan. 29.
The central bank has cut interest rates by 50 basis points at each of its last two policy announcements to bring the cumulative reduction in borrowing costs to 175 basis points since June, helping restrict the rise in consumer prices to the mid-point of its desired target range of 1-3% for several months.
BoC Governor Tiff Macklem indicated last week that further rate cuts would be more gradual.
Currency market bets were hardly changed after the inflation data, and they see a 55% chance of another cut of 25 basis points in January.
The Canadian dollar pared some losses after the data and was trading down 0.27% to 1.4280 against the greenback, or 70.03 U.S. cents.
While prices for travel tours were a leading contributor in the small decline in headline inflation, cost of travel services declined less in November than in October, Statscan said, noting that higher hotel prices coincided with a series of high-profile concerts in the month.
Mortgage interest cost inflation, the other top contributor to the slower headline figure, continued its deceleration for 15 months in a row to 13.2% in November from 14.7% in October.
However, on a yearly basis, prices for rent accelerated in November by 7.7% compared with October’s rise of 7.3%.
Grocery prices rose 2.6% on an annual basis in November, down from 2.7% in the month earlier, while gasoline prices fell 0.5% after falling 4% in October.
Excluding volatile food and energy, prices rose 1.9% in November compared with a 2.3% rise in October.
