Pump prices affect inflation

gas-pumpOTTAWA— The collapse in oil prices slowed Canadian inflation in December as falling pump prices helped decelerate the annual rate to 1.5 per cent, a drop from its 2-percent perch the month before.

On Friday, Statistics Canada’s latest consumer price index found gasoline prices in December fell 16.6 per cent compared with the year before, following November’s year-over-year decline of 5.9 per cent.

The broad transportation category, which included gasoline, stood as the lone decliner as cheaper gas weighed against rising prices in seven of the report’s eight major categories compared with a year earlier. The data represented the latest example of how the rapid decline of oil prices has made an impact on Canada.

The Bank of Canada stunned the country Wednesday by unexpectedly cutting its trend-setting interest rate by a quarter percentage point to 0.75 per cent. It based its decision as a response to the weakening effect of low crude prices on inflation.

Also due to the oil-price plunge, the central bank predicted inflation to temporarily dip below 1 per cent in 2015 — under the bank’s target range — before climbing back up to 2 per cent in the second half of the year.

The oil-price collapse prompted the federal government to take the unusual step of delaying its budget until at least April, so it could weigh the effects on Canada’s bottom line.  ANDY BLATCHFORD  THE CANADIAN PRESS

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