July Inflation Report

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Key Numbers

July June ! Consensus: !

Core Inflation y/y +1.7% +1.8% !Core: +1.9% y/y!

Core Inflation m/m -0.1% -0.1% !Headline: +2.2%!

All-items CPI y/y +2.1% +2.4% ! !

All-items CPI m/m -0.2% +0.1% !Actual: !

!Core: +1.7% !

!Headline: +2.1%!

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By Nirmala Menon

OTTAWA--Canada's core inflation rate slowed unexpectedly in July for the first time in five months, and the headline rate decelerated faster than expected, giving the central bank scope to hold on to its neutral policy bias.

The headline consumer price index rose 2.1% year-on-year from 2.4% in June, led by cheaper costs of gasoline and vehicles, Statistics Canada said Friday.

The key core CPI, which excludes some food and energy costs, slowed to 1.7% from 1.8%. The Bank of Canada uses the core measure as a gauge of underlying inflation.

Market expectations had been for the core measure to quicken to 1.9% and the headline rate to slow to 2.2%, according to a report from Royal Bank of Canada.

The slower inflation rate appears to validate the Bank of Canada's assertion that the recent spike in consumer prices are temporary.

Total CPI declined 0.2% month-on-month following a 0.1% increase in June, and the core measure dropped 0.1%, the same as previously.

On a seasonally adjusted basis, total monthly CPI fell 0.1%, the first decline since October 2013, and the core rate slowed to 0.1% from 0.2% in June.

Write to Nirmala Menon at nirmala.menon@wsj.com

(END) Dow Jones Newswires

August 22, 2014 08:45 ET (12:45 GMT)

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