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Canadian inflation holds steady at 1.9% in September as gas prices fall

Credit: REUTERS/CHRIS HELGREN

Canada's annual inflation rate unexpectedly held steady at 1.9% in September, Statistics Canada said on Wednesday in its last major release of economic data before a national election, further reducing analysts' expectations the Bank of Canada will cut rates later this month.

By Kelsey Johnson

OTTAWA, Oct 16 (Reuters) - Canada's annual inflation rate unexpectedly held steady at 1.9% in September, Statistics Canada said on Wednesday in its last major release of economic data before a national election, further reducing analysts' expectations the Bank of Canada will cut rates later this month.

Canada is in the midst of a tight national election campaign with polls showing the governing Liberals are in a statistical tie with the opposition Conservatives, who have focused their campaign on issues related to the cost of living. Canadians vote on Oct. 21.

"The headline CPI inflation increase I think was a little softer than expected," said Nathan Janzen, a senior economist with the Royal Bank of Canada. Analysts in a Reuters poll had forecast an annual inflation rate of 2.1%.

The Canadian dollar weakened to C$1.3243, or 75.51 cents U.S.

The Bank of Canada has held its overnight interest rate steady since October 2018, citing strong domestic economic data. The central bank's next rate decision is set for Oct. 30.

"This is perfect for the Bank of Canada, it doesn't really show any need for them to change tack with their current stance," said Simon Harvey, a FX market analyst for Monex Europe and Monex Canada.

"I think we can pretty much disregard a Bank of Canada rate cut for this year," he added.

Statistics Canada said prices for goods rose 1.3% year-over-year in September while prices for services increased by 2.2%.

Meanwhile, consumer prices for gasoline fell 10.0% year-over-year in September following a 10.2% decrease in August. The agency said the decline was partially due to continued low global demand for oil as well as refineries switching from summer-blend gasoline to the less expensive winter blend.

Meat prices rose 5.5% year-over-year last month, with fresh or frozen beef rising 4.7% compared to August, Statistics Canada said. Passenger vehicles were also up, jumping 3.4% in September compared to a year earlier.

CPI common, which the central bank says is the best gauge of the economy's underperformance, was at 1.9%.

CPI median, which shows the median inflation rate across CPI components, was at 2.2%, while CPI trim, which excludes upside and downside outliers, was at 2.1%. August's CPI trim was revised down to 2.0% from 2.1%

In a separate release, Statistics Canada said foreign investors bought a net C$4.99 billion ($3.78 billion) in Canadian securities in August, while Canadian investors sold a net C$4.71 billion worth of foreign securities, led by sales of foreign stocks. L2N27019Z

Graphic - Canada economic snapshot:http://tmsnrt.rs/2e8hNWV

(Reporting by Kelsey Johnson, Additional reporting by Fergal Smith, Moira Warburton in Toronto, Editing by Dale Smith and Chizu Nomiyama)

((1-613-235-6745; kelsey.johnson@tr.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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