B.C. inflation rate eases to 2.5 per cent in September

Bank of Canada governor Stephen Poloz will announce the rate decision on Oct

The annual pace of inflation slowed more than expected in September as increases in the price of gasoline continued to ease.

The 2.2 per cent figure registered "well below" the consensus forecast of 2.7 per cent, according to TD senior economists James Marple.

The consumer price index in September rose 2.2 percent from that a year ago, in comparison with a year-on-year increase of 2.8 percent in August.

Gas price growth fell to 12 percent year-on-year from August's 20 percent, but the biggest move was air transportation, which went to 7.4 percent from 26.4 percent.

September marked the eighth consecutive month that the overall inflation rate has exceeded the Bank of Canada's 2.0 per cent target.

The central bank is widely expected to raise its key interest rate target, which sits at 1.5 percent, by a quarter of a percentage point.

"The biggest factor in last month's swoon was a 16.6-per-cent plunge in airfares, the largest monthly drop in 30 years, which nearly precisely reversed July's 16.3-per-cent spike-which had been the biggest monthly rise in, yes, 30 years", said BMO chief economist Douglas Porter.

Price increases slowed in September on a year-on-year basis after spiking to 2.8 percent in August and 3 percent in July, which beat a record held since 2011. Alcoholic beverages and tobacco products were up 4.4 percent.

The Bank of Canada aims to keep inflation within a target range of 1 to 3 percent and adjusts its interest rate target to help achieve that goal. Core measures of inflation - considered a better indicator of underlying pressures - also ticked lower and averaged 2 percent last month.

Separately, Statscan said the value of Canadian retail trade unexpectedly fell by 0.1 per cent in August, the second decline in three months, in part due to lower sales of gas and clothing.

"Together, these two items [gas and air transportation] took 0.5 percentage points from the headline reading", Marple said. In volume terms, sales decreased 0.3 per cent.

Sales at gasoline stations were down 2.0 per cent, while clothing and clothing accessories stores fell 1.2 per cent.

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