OTTAWA, July 19 (Reuters) - Canada's annual inflation rate rose in June for the second straight month to 1.2 percent after hitting a 3-1/2-year low in April, but price pressures remained muted as the central bank signaled an extended pause on interest rates.
The consumer price index (CPI) was unchanged in the month, Statistics Canada said on Friday, but the year-on-year rise in transportation, shelter and food pushed up annual inflation from 0.7 percent in May. Inflation bottomed out in April at 0.4 percent.
Core CPI, excluding gasoline and other volatile items, fell 0.2 percent in the month but quickened to a 1.3 percent annual rate compared with 1.1 percent the previous month.
Both annual rates came in exactly as forecast, although on a monthly basis analysts in a Reuters poll had expected total CPI of 0.1 percent and a 0.1 percent drop in core CPI.
With inflation at the lower end of the Bank of Canada's target range of 1-3 percent, the data does little to knock the bank off its accommodative monetary policy stance. The bank said on Wednesday it would keep its benchmark lending rate unchanged at 1 percent as long as 'the inflation outlook remains muted', the economy has significant slack and household debt stays under control.
Statscan said transportation costs accelerated in the 12 months to June as gasoline prices jumped 4.6 percent and car prices rose 2 percent. Both items had fallen in May.
(Reporting by Louise Egan and Alex Paterson; Editing by Theodore d'Afflisio) Keywords: CANADA ECONOMY/INFLATION
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