Canada Inflation Falls to Slowest In 4-years on Gas

Canada’s annual inflation rate fell in April to its slowest in more than three years, taking it below the central bank’s target band and adding to evidence of growing slack in the world’s 11th largest economy.

The consumer price index rose 0.4 percent in April from a year ago compared with a 1 percent gain the prior month, Statistics Canada said today from Ottawa. That’s the slowest since October 2009, when the country experienced a period of deflation following the recession.

The report is the last reading on inflation before Stephen Poloz takes over from Mark Carney as Bank of Canada Governor, and gives him less scope to raise his key interest rate. Economists forecast the central bank will keep the benchmark rate at 1 percent into next year.

The data reinforce expectations the “Bank of Canada will be on hold for an extended period,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto, in a telephone interview.

The Canadian dollar extended losses following the report, dropping 1 percent to C$1.0293 per U.S. dollar at 8:41 a.m. in Toronto. One dollar buys 97.15 U.S. cents.

The April year-over-year figure trails the Bank of Canada forecast that prices will advance at a 1 percent pace in the second quarter. The central bank, which projects inflation will remain below their 2 percent target until the second quarter of 2015, sets interest rates to keep inflation in the middle of a 1 percent to 3 percent band.

Bloomberg

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

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