By Promit Mukherjee
OTTAWA (Reuters) -Canada’s annual inflation rate rose to 1.9% in June, meeting analysts’ expectations, as increases in the price of automobiles and clothing and footwear pushed the index higher, data showed on Tuesday.
The consumer price index was at 1.7% in the prior month.
Statistics Canada said on a monthly basis the CPI increased 0.1%, matching analysts’ forecasts.
It is for the third month in a row that the CPI has been under 2%, or the mid-point of Bank of Canada’s inflation target range.
This is the last major economic indicator to be released before the Bank of Canada’s rates decision later this month.
The slight rise in prices across many segments, along with a strong jobs number last week, is likely to take away any incentive to cut interest rates, economists had earlier predicted.
Money markets were betting the odds for a rate cut at just over 15% after the data was released. The central bank will announce its monetary policy decision on July 30.
The Canadian dollar was trading stronger by 0.19% to 1.3677 against the U.S. dollar, or 73.12 U.S. cents. Yields on the government’s two-year bonds were down 0.6 basis points to 2.761%.
The rise in prices in June was primarily led by a 2.7% jump in durable goods such as automobiles and furniture, following a 2% rise in May on a year-on-year basis, Statscan said.
Passenger vehicle prices rose 4.1% on an annual basis in June following a 3.2% increase in May, the agency added.
Inflation was further boosted by a rise in price of clothing and footwear which accelerated 2% annually in June after a modest 0.5% rise in May.
“Uncertainty surrounding international trade put upward pressure on prices for clothing and footwear in June, as the industry faced higher costs in the wake of tariffs,” Statistics Canada said.
However, the inflation still managed to clock a rate of rise below 2% helped by the scrapping of the consumer carbon levy on gasoline in April. Gasoline prices are expected to be depressed for the next ten months due to the base-year effect.
On a year-over-year basis gasoline prices fell by 13.4% in June from 15.5% in May.
Economists and the central bank have focused on the core measures of inflation, which excludes the impact of tax measures, to gauge price trends.
One of the core measures of inflation the CPI-median, or the centermost component of the CPI basket when arranged in an order of increasing prices, edged up to 3.1% in June, from 3% in the prior month.
The other core measure CPI-trim, which excludes the most extreme price changes, was unchanged in June at 3% from May, Statscan said.
Shelter prices, which accounts for up to 30% of the CPI basket weight and comprises mortgage and rent, rose by 2.9%, its first drop below 3% in more than four years.
(Reporting by Promit Mukherjee; Editing by Dale Smith and Nick Zieminski)
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