Price inflation in the world’s tenth largest economy fell on an annualized basis, giving relief to a central bank concerned with monetary stimulus sparking unwanted consumer price inflation.  According to Statistics Canada, inflationary pressures increased by 2.3% annually in December.  The figure follows a more cautious 2.9% annual uptick in prices for the month of November – and is lower than market estimates of a 2.7% rise.

Slower price increases in major subcomponent readings helped to bolster the lower than anticipated figure, with gasoline price declines leading the charge.  Prices of gasoline increased by 7.6% in the month, or about 40% less than gains in November.  The previous month’s report showed a 13.5% surge in gasoline prices.  Food price increases also slowed for the month, gaining by 4.4% compared to November’s 4.8% advance.

Additionally, core index figures rose by 1.9% on an annualized basis, considerably slower than the 2.1% in the previous month’s survey.

As a result of the report, the Canadian dollar declined against the dollar, falling to 1.0140 – from as high as 1.0120 in the overnight.  With consumer inflation seemingly tamed at this point, Bank of Canada policy officials are likely to keep rates at the 1% low in order to accommodate to currently slowing sectors – without adding further stimulus.  Earlier this month, Bank of Canada officials – led by Governor Mark Carney – highlighted the considerable amount of monetary stimulus still existent in the Canadian economy.  The sentiment has sparked speculation that central bankers will opt for rate hikes in the second half of the year.