The growth of consumer prices in Canada decelerated, diverging from the bank target towards deflation.
The data presented by Canada’s national statistical agency on Friday showed that in May inflation dipped by 0.1% to a 2-year low of 1.2% on an annual basis.
The main contributors to the decrease were prices of auto fuel, cars and women’s clothing. Analysts though inflation would only go up by 0.2%.
The CPI excluding the eight most volatile components turned out to be slightly below forecasts. The index grew by 1.8% instead of the projected 1.9%.
So, there is a rising possibility that the Bank of Canada could reduce the interest rate at its next meeting. Earlier however, the regulator had been rather seen to raise the rate.
Despite the shattered hopes of analysts, the national currency of Canada climbed up. Therefore, the CAD/USD pair closed at 1.0240.
Generally speaking, the country pressurized by the Eurozone crisis and overall economic slump is likely to demonstrate growth. That is why the loonie is not expected to rise further.