The annual inflation rate remained at 2.5% in June, the same as it was in May, Statistics Canada said today.

Gasoline prices were the main reason prices continued to climb. However, gasoline’s 12-month increase slowed from 30.3% in May to 24.5% in June.

The inflation report was in line with economists’ expectations.

In addition to the rise in the cost of gasoline, consumers also paid more for housing, cigarettes, tuition fees and homeowner’s insurance.

Dampening these increases were lower prices for computer equipment and supplies, automotive leases, fresh vegetables and traveller accommodation, StatsCan said.

Excluding eight volatile components identified by the Bank of Canada, overall prices rose 1.7% from June 2003 to June 2004. This follows a 1.5% rise in May.

“This report will have next to no impact on next week’s decision [on interest rates] by the Bank of Canada, but it reinforces the point that core inflation has hit bottom, and is gradually moving higher — with the emphasis on gradually,” BMO Nesbitt Burns chief economist Sherry Cooper said in a commentary.

“This turnaround sets the stage for interest rate increases, probably starting in September,” Cooper said.