OTTAWA, Nov 17 (Reuters) - Canada's annual inflation rate in October eased to 2.2% as gasoline prices dropped, food prices eased and mortgage interest costs came down below the 3% mark, data showed on Monday.
The removal of carbon levy on gasoline earlier this year continued to depress yearly price increases for the past several months. Barring the carbon levy removal, annual consumer price index rose by 2.7% in October from 2.9% in September, Statistics Canada said.
Analysts polled by Reuters had forecast the inflation to be at 2.1% for October, down from 2.4% in September. On a monthly basis, they forecast inflation to be 0.2%.
On a monthly basis, CPI inflation was in line with forecasts, StatsCan data showed.
The Bank of Canada has cited stable inflation as one of the prime reasons to signal a halt in rate cuts last month. A further easing in October is likely to bolster its confidence to stand pat on the current policy rate of 2.25% next month.
A bigger monthly decline in the price of gasoline in October brought down the annual price drop of the fuel to 9.4% in October compared with a drop of 4.1% in September. The year-on-year fall in gasoline prices has been mainly due to the removal of carbon levy on the fuel.
Another contributor the slower increase in inflation was food prices. Year over year, prices for food purchased from stores rose 3.4% in October, down from a 4.0% increase in September.
Though grocery prices decelerated in October, prices remained elevated and have exceeded overall inflation for nine consecutive months, StatsCan said.
Mortgage interest cost, a part of shelter inflation, increased at an annual pace of 2.9% in October. This was the first time in more three years that it came down below 3%.
However rent inflation, another part of the overall shelter inflation, rose above 5% clocking an acceleration for two months in a row.
Due to volatility in some prices and government's tax breaks, the BoC and economists have tracked the measures of core inflation to gauge price trends in Canada.
One of the core measures of inflation, the CPI-median, or the centermost component of the CPI basket, was at 2.9% in October, down from a downwardly revised 3.1% in September, the statistics agency said.
The other core measure, CPI-trim, which excludes the most extreme price changes, edged down to 3.0% in October from 3.1% in September, StatsCan said.
Reporting by Promit Mukherjee; Editing by Dale Smith
