Canadian Inflation Rate Drops to Lowest Since 1994

Canada’s annual inflation rate fell to the lowest in more than fourteen years in April on falling energy prices, giving the Bank of Canada more scope to keep interest rates at record lows., Bloomberg 5/20/2009 9:22:02 AM

The inflation rate fell to 0.4 percent from 1.2 percent in March, Statistics Canada said today in Ottawa. That’s the lowest since December, 1994, when the rate was 0.2 percent. Consumer prices fell 0.1 percent on the month. Economists surveyed by Bloomberg predicted the annual pace would slow to 0.6 percent, and that prices would rise 0.2 percent from March.

The Bank of Canada, which sets borrowing costs to keep inflation at 2 percent, cut its benchmark interest rate to 0.25 percent on April 21 and said it would keep the rate there until the second quarter of 2010, as long as its inflation outlook remains unchanged.

The central bank projects the consumer price index will fall by 0.8 percent in the third quarter of this year, and not return to target before the second half of 2011.

Gasoline prices fell 25 percent from a year ago, and the cost of buying or leasing a car dropped 8.3 percent, helping to push the annual index lower, the statistics agency said. Shelter costs rose by 0.2 percent on the year.

The annual inflation rate excluding gasoline and seven other volatile items -- the so-called core rate -- slowed to 1.8 percent in April from 2 percent in March. On a monthly basis, core prices rose 0.1 percent.

Canadian Inflation Rate Drops to Lowest Since 1994