Statistics Canada data released on Tuesday showed Canada's annual inflation rate fell more than expected to 2.8% in June, the lowest level in 27 months, although food prices remained high.
Analysts interviewed by Reuters had previously forecast inflation to fall to 3.0% from 3.4% in May. On a month-on-month basis, the consumer price index rose 0.1%, which was also lower than the expected increase of 0.3%.
June's reading, which is based on a comparison with the highest inflation in four decades in June last year, shows the annual rate is within the Bank of Canada's control range of 1% to 3% for the first time since March 2021.
Gasoline prices, which contributed to the slow reading, fell by 21.6% compared to June 2022 as China, the largest importer of crude oil, eased some of the COVID-19 public health restrictions that contributed to higher global demand.
Prices of grocery items rose 9.1% in June from a year earlier, slightly higher than the increase recorded in May. Food prices from restaurants also slowed slightly in June compared to May.
Excluding food and energy, prices rose 3.5% compared to a 4.0% increase in May.
The central bank, pointing to excess demand, announced last week that it expects inflation to hover around 3% next year before falling to the bank's 2% target by mid-2025, six months later than previously expected.
The central bank has raised interest rates to 5.0%, the highest level in 22 years, and said it may raise interest rates higher if the latest data shows inflation is above that target.
The average of two of the Bank of Canada's (BoC) core measures of underlying core inflation, CPI-median and CPI-trim, stood at 3.8% versus 3.9% in May.
