Canada Inflation Plunges On Lower Energy Prices

Ottawa: Canada's inflation rate plunged in April on lower energy prices, but food costs continued to rise, the national statistical agency said Tuesday.

Overall prices rose 1.7 percent year over year, down from a 2.3 percent increase in March, Statistics Canada said.

This was largely driven by lower energy prices, with gasoline costs falling 18.1 percent and prices for natural gas down 14.1 percent after a federal levy on carbon pollution was cancelled and crude oil prices fell, the agency said.

Oil prices retreated due to lower demand resulting from tariffs disrupting international trade and increased supply.

The costs of food and travel tours, meanwhile, rose.

Food prices in Canada have been increasing at a faster pace over recent months than the overall rise in the costs of goods. The 3.8-percent increase in April was led by higher prices for fresh vegetables, beef, coffee and tea, sugar and prepared foods.

The cost of restaurant meals also increased in the month.

The inflation data comes two weeks before the Bank of Canada is set to make its next interest rate announcement on June 4.

Analysts noted that while headline inflation has cooled, increased prices for a basket of goods used by the central bank in determining its key lending rate were concerning.

The inflation data and the latest jobs report, which saw manufacturing take a hit from a Canada-US trade war, however, had most observers still believing a rate cut is coming.

"With the economy clearly weakening in recent months, lower inflation expectations should keep central bankers on track to cut rates 25 basis points in June," Desjardins analyst Royce Mendes said in a research note.

The central bank had steadily lowered its policy rate over the past year before recently pausing at 2.75 percent, saying it needed more time to assess the impact of the trade war on the Canadian economy.

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