Canada's annual inflation rate eases to 1% in June

Canada's annual rate of inflation came in at one per cent on a year-over-year basis in June, easing from the 1.3 pergain seen in May, Statistics Canada said Friday.

The June figure for the consumer price index came in just below the 1.1 per cent consensus of expectations of economists.

Statistics Canada said energy pricesdecreased in the12months to Juneafter the previous month's increase. At the same time, food prices rose year over year in June.

Factoring out the food and energy segments, the CPI rose by 1.4 per cent year over year in June, matching the gain in May.

Cheaper gasoline

Statistics Canada said consumers paid less at the pump as gasoline prices fell by 1.4% in the12months to June, after increasing6.8 per cent in May.

Electricity prices dropped5.3 per cent over the previous 12 months, while there were increases in prices for natural gas, fuel oil and other fuels.

Meanwhile, after eight straight months of declines, the food price index rose0.6 per cent in the12months to June. Year-over-yeardeclines in prices for meat and bakery products moderated, and prices for fresh vegetables increased at a faster pace in June than in May.

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Two of three inflation readings that the Bank of Canada tracks for its purposes of setting monetary policy showed small increases from May to June, while other was flat.

The Bank of Canada recently raised its key interest rate for the first time in seven years, citing strength in the Canadian economy. At the time of its announcement, the central bank said it believed that the current benign inflation figures will be temporary.

TD Bank senior economist James Marplesaid those temporary factors were evident in June, asgasoline, electricity and passenger vehicle prices all weighedon the overall inflation number.

"The Bank of Canada was likely to see through this [report], whatever it came in at," Marple said in a commentary.

"Having said that, the bank did communicate that it expects the weakness in the core measures to firm, and the June data suggests a break from the several month downward trend," Marplewrote.

"This may provide confidence that as slack diminishes, inflation should begin moving toward the two per centtarget."