Inflation rate dips to 1% in January on cheaper gasoline

Canada's inflation rate dropped to oneper cent in January, dragged down by cheaper gasoline.

The consumer price index dropped from 1.5 per cent in December,Statistics Canada said Thursday,the third straight month of decline.

The oneper cent showing is the lowest rate in more than a year.

Driving the drop were gasoline prices, which were 27 per cent lower in January than in the same month a year earlier, markingtheir lowest point since April 2009.

Stripping out the impact of cheap gasoline, the inflation rate is a lot higher, withStatistics Canada sayingpricesincreased at an annual rate of 2.4 per cent in January an increase from the previous month's showing of 2.3 per cent.

Indeed, outside of gasoline, lots of itemsgot more expensive in January. For instance, food prices rose 4.6 per cent, the biggest gainsince November 2011.

Prices decline out east

Regionally in January, consumer prices in the Atlantic provinces fell, led by P.E.I. which saw a negative inflation rate of 1.9 per cent. (Alow inflation rate in that region of Canadaat the momentmakes sense, considering theCPIbasket weight for fuel oil in Atlantic Canada is larger than in the countryas a whole.)

Inevery province outside Atlantic Canada,consumer prices increased, but at a slower annual rate than in January. Ontario postedthe highest inflation rate, at 1.6 per cent.

Outside of oil, prices roseby more than what most economists had been expecting a sign the Bank of Canada might be in less of a hurry to lower rates any more, as they did last month.

As Scotiabank put it in a note to clients,"For now, it supports our view that the Bank of Canadas on hold until [the third quarter] of 2015."

TD Bank agreed that the weak inflation figure makes another rate cut unlikely. \

"Developments that have taken place since the last Bank of Canada meeting last month suggest that another rate cut in March is unlikely," economistDina Ignjatovic said.