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Canada’s Inflation Slows to 2.3% on Energy, Clothes

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Feb. 18 (Bloomberg) -- Canada’s inflation rate slowed in January on a moderation in energy costs and a decline in clothing prices, government figures showed.

The consumer price index rose 2.3 percent from a year earlier after a 2.4 percent gain in December, Statistics Canada said today. The core inflation rate, which excludes eight volatile items such as gasoline, slowed to 1.4 percent from 1.5 percent. Economists forecast inflation would be 2.4 percent and the core rate 1.5 percent, according to the median of 23 and 22 estimates in a Bloomberg News survey.

The economy has “considerable slack” that is helping restrain price increases, the Bank of Canada said last month. Governor Mark Carney will raise his key interest rate to 1.25 percent by midyear from 1 percent as the recovery builds, according to a Bloomberg survey. Other reports in the last month have shown gains in exports and employment that were faster than economists had predicted.

“Given the solid gains we have seen since the end of January we are going to see some pressures start to build” for inflation, said John Clinkard, chief economist at Deutsche Bank Canada in Toronto. “This is probably going to force the bank’s hand in April.”

Canada’s currency traded at 98.38 cents per U.S. dollar at 7:38 a.m. in Toronto, compared with 98.43 cents yesterday. One Canadian dollar buys $1.0165.

Energy Prices

Energy prices rose 9 percent in January from a year earlier, versus a pace of 10.5 percent in December, Statistics Canada said. Clothing prices fell 2.4 percent, the only one of eight major categories to do so, the report said.

The transportation costs category rose 4.8 percent in January from a year earlier, and alcohol and tobacco costs rose 3.1 percent, Statistics Canada said.

On a monthly basis, overall consumer prices rose 0.3 in January after they were unchanged the previous month. The core rate was unchanged after it fell by 0.3 percent in December.

Economists predicted that monthly prices would rise 0.3 percent, and the core rate would rise by 0.1 percent on the month.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Christopher Wellisz at cwellisz@bloomberg.net.

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