2018.02.2523:07:00UTC+00Canada Annual Inflation Eased Slightly in January

Canada's annual inflation rate eased in January from the previous year as consumers paid less for gasoline and vehicles. Nonetheless, strong underlying prices were seen keeping the central bank on course to hike interest rates again later this year.

The annual inflation rate was 1.7 percent in January, according to Statistics Canada, down from 1.9 percent in December.

The Canadian dollar climbed against the greenback following the stronger-than-expected figures.

While monthly data can be volatile, the trend in recent months has been upward, with the price strength reflecting an economy that emerged from a strong performance in 2017 and continues to grow above its potential.

The Bank of Canada's three measures of core inflation were also less muted, with CPI common, which the central bank says is the best gauge of the economy's underperformance, increasing to 1.8 percent, the highest since April 2012. Taken together, the core measures averaged 1.8 percent.

The bank has increased rates three times since July amid a strengthening economy and labor market, and has said it will be data-dependent in its approach from here.

Rounding out the three measures of core inflation, CPI median, which shows the median inflation rate across CPI components, stood at 1.9 percent, while CPI trim, which excludes upside and downside outliers, remains unchanged at 1.8 percent.

The Bank of Canada expects inflation will stay at about two percent on average over the next two years -- in line with an economy around full capacity.