Annual inflation slows to 1 per cent in March

(Reuters) — Canada's annual inflation rate in March slowed to 1.0 per cent from 1.2 per cent in February, further underlining how little pressure there is on the Bank of Canada to raise rates any time soon.

The main reason for the drop in the annual rate was lower gas prices, Statistics Canada said on Friday. The March rate was slightly less than the 1.1 per cent predicted by market operators.

The Bank of Canada — which has kept its overnight lending rate at a near record low since September 2010 — on Thursday said it did not expect inflation to hit its 2 per cent target until mid-2015. The central bank is not expected to raise rates until the second half of 2014.

Gasoline prices in the year to March fell by 0.3 per cent after rising 3.9 per cent in the 12 months to February. Food prices grew by 1.8 per cent in the year to March, down from the 1.9 per cent recorded in February.

The Bank of Canada's closely-watched core rate, which strips out volatile prices of items such as energy and some foodstuffs, stayed unchanged at 1.4 per cent.