Canada's inflation rate drops to 2% in September

Canada's inflation rate came in at two per cent in September, down slightly from August's level but in line with expectations.

Higher prices for shelter and food contributed the most to the rise in the consumer price index, the data agency said Friday, while the transportation index posted the smallest increase, thanks to cheaper gas prices.

Three categories of goods with some of the biggest pricee hikes were:

• Meat:11.5 per cent.
• Cigarettes:11.4 per cent.
• Telephone services:7.6 per cent.

Indeed, meat prices alone drove the overall inflation rate up by 0.3 percentage points. BMO economist Doug Porter said meat prices this year have increasedat their fastest pace since the mid-1980s.

Tuition increases were also a factor in the numbers, rising 3.2 per cent in September compared to the same month a year earlier.

They increased the most for Ontario residents (up four per cent) and the least for residents of Newfoundland and Labrador (risingby 0.9 per cent).

The overall inflation rateincreased in every province,with Ontario and Alberta seeing the biggest gains.

The core inflation rate which strips out volatile items like food and energy prices and the one the Bank of Canada pays more attention to in setting interest rates came in at 2.1 per cent on an annualized basis, the same as the previous month's level.

The Bank of Canada has kept its benchmark interest rate at oneper cent for more than fouryears now. The bank will announce its next policy decision on Wednesday, and few are expecting any change to that.

"In light of recent market events, most notably the slump in world oil prices, the Bank of Canada is likely to remain very much neutral with regard to the interest rate outlook," David Madaniof Capital Economicssaid in a note to clients.