The annual pace of inflation slowed more than expected in September as increases in the price of gasoline continued to ease.

Statistics Canada said Friday the consumer price index in September was up 2.2 per cent from a year ago compared with a year-over-year increase of 2.8 per cent in August.

Economists had expected the September figure to come in at 2.7 per cent, according to Thomson Reuters Eikon.

The inflation report comes ahead of the Bank of CanadaB次元官网网址檚 rate decision next week when it will also update its forecast for the economy in its monetary policy report.

The central bank, which aims to keep inflation within a target range of one to three per cent and adjusts its interest rate target to help achieve that goal, is expected to raise its key interest rate target, which sits at 1.5 per cent, by a quarter of a percentage point.

TD Bank senior economist James Marple said the softer-than-expected inflation report did little to alter TDB次元官网网址檚 expectation that the Bank of Canada will raise rates next week.

B次元官网网址淚 donB次元官网网址檛 think one month of soft price growth is going to change the Bank of CanadaB次元官网网址檚 mind on a rate hike,B次元官网网址� he said.

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Marple said the new U.S.-Mexico-Canada Agreement removed a key risk for the economy, but added challenges such as high household debt remain.

B次元官网网址淭hereB次元官网网址檚 still are some underlying risks that have always been there and maybe werenB次元官网网址檛 in the spotlight because we were all focused on trade,B次元官网网址� he said.

B次元官网网址淲e have very high household debt levels. We have mortgage rates that have been increasing and will continue to increase even with very little action from the Bank of Canada.B次元官网网址�

Statistics Canada said prices were up in all eight major components for the 12 months to September.

The transportation index, which includes gasoline, was up 3.9 per cent in September compared with a 7.2 per cent move in August as gasoline prices last month were up 12 per cent compared with a 19.9 per cent increase in August.

However, the transportation group remained the largest contributor to the overall year-over-year increase in the index.

Food prices were up 1.8 per cent, while shelter costs rose 2.5 per cent. Alcoholic beverages and tobacco products were up 4.4 per cent.

Bank of Montreal chief economist Doug Porter noted the price of air fares, while up 7.4 per cent from a year ago, fell 16.6 per cent compared with the previous month. Hotel rates were also down 5.2 per cent compared with a year ago.

B次元官网网址淲ith travel tours also down 3.2 per cent, that meant that tourism overall got a lot cheaper in Canada last month,B次元官网网址� Porter wrote in a brief report, adding that vehicle prices were up just 0.7 per cent on a year-over-year basis.

B次元官网网址淎ll of these soft sectors combined to clip core inflation as well, although the easing there was much less dramatic than in the headline tally,B次元官网网址� Porter said.

The average of the three measures of core inflation, which look to strip out more-volatile items like gas prices and are closely scrutinized by the Bank of Canada, was 2.0 per cent in September compared with 2.1 per cent in August.

In a separate report, Statistics Canada said retail sales fell 0.1 per cent in August to $50.8 billion as sales moved lower in seven of 11 of the subsectors tracked by the agency.

Sales at gasoline stations were down 2.0 per cent, while clothing and clothing accessories stores fell 1.2 per cent. Motor vehicle and parts dealers saw sales increase 0.8 per cent.

Retail sales in volume terms were down 0.3 per cent.

Craig Wong, The Canadian Press

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