Canada's annual inflation rate cools below forecast on cheaper fuel

By Promit Mukherjee

OTTAWA, July 20 (Reuters) - ‌Canada's annual inflation ​rate cooled ​more than expected to 2.8% in June, data showed on Monday, as gasoline costs fell sharply after the U.S. and Iran signed their memorandum ‌of understanding to end the war.

The war has since then flared up ⁠again in the Middle East and gasoline costs have started inching up.

The Consumer Price Index on a month ‌on month basis decelerated by ‌0.4%, Statistics Canada said.

- Analysts polled by Reuters had forecast an annual inflation rate of 2.9% and a monthly inflation rate of -0.2% in June.

- Last month, the consumer ​price index had clocked a 29-month high of 3.2%, breaching the Bank of Canada's control range of 3% in more than two years.

- Gasoline prices were the biggest ⁠contributor to the easing in inflation rate with price of the fuel purchased at the pump falling by over 10% ​in June, StatsCan said. On a year over year basis, gasoline costs rose at a rate of 20.5% in June, down from a ​rise of 33.2% in the prior month.

- Excluding ‌gasoline, the CPI was unchanged in June compared with May, at 2.2%, StatsCan said.

- Due to a continued increase in gasoline prices, transportation ⁠costs, which accounts for around 18% of the CPI basket, rose by 6.7% in June on an annual basis.

- Other items in the basket that grew at more than 3% were food, which ⁠rose by 3.5% in June, and the recreation, education and reading category, which increased by 3.8%, data ​showed.

- However, the rise in grocery prices cooled slightly with the cost of food purchased from stores rising by 3.9% on an annual basis last month, down from 4.3% in May. June was the ‌17th consecutive month that grocery price inflation outpaced the all-items CPI.

- The core measures of inflation, closely watched by the BoC to ‌gauge underlying inflation trends, eased further in June. CPI-median was down to 1.9% from 2.1% in ⁠May, while CPI-trim fell to 1.8% ‌from 2% in the prior ​month.

- The Canadian dollar slid 0.18% to C$1.4045 to the U.S. dollar, or 71.20 U.S. cents.

(Reporting by Promit Mukherjee; Editing by Dale Smith and ‌Nick Zieminski)

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