Canada’s annual inflation rate was at 2.0% in January, down slightly from the 2.1% rate recorded in December, Statistics Canada said today.

StatsCan said the core inflation rate, which excludes the most volatile commodities, was 1.6%, off from 1.7% in December.

StatsCan said lower prices for computers and supplies, men and women’s clothing and fresh vegetables helped slow inflation in January.

Gasoline prices, property taxes, restaurant meals and homeowners’ replacement costs all rose last month.

On a month-to-month basis, prices slipped 0.1% between December and January.

Economists said Consumer Price Index inflation looks stable, at least for the first half of the year.

“While the CPI is unlikely to continue to retreat, it is also unlikely to rise sharply either,” said Craig Alexander of TD Bank.

Sal Guatieri, senior economist at the Bank of Montreal, said the inflation numbers suggest stability for interest rates.

“With the core rate of inflation perched comfortably below the two per cent midpoint target, the Bank of Canada will be in little hurry to resume tightening,” he said.

“Amid concerns about the strong Canadian dollar’s impact on growth, the bank is unlikely to raise overnight rates until September.”

Warren Lovely of CIBC, said a rate cut might even be in the cards, especially if the U.S. dollar slips and the loonie strengthens.

“If the Canadian dollar does threaten to move sharply higher, the bank could be forced into a cut to defuse the risk to growth,” he said.

Separately, Statistics Canada said the composite leading indicator continued to firm in January, up 0.2% after a 0.3% gain in December and no growth in November.

Stats said growth was distributed in the same manner as in December, with steady gains by household spending supported by manufacturing and services.

Seven components rose in January, one more than in December, while the rate of decline of the U.S. leading indicator continued to moderate.

Inflation
http://www.statcan.ca/Daily/English/050222/d050222a.htm

Leading indicators
http://www.statcan.ca/Daily/English/050222/d050222b.htm