TORONTO, Jan 18 (Reuters) - Canada's annual inflation rate in December firmed to 2.0 percent from 1.7 percent in November, on the back of rising air transportation and telephone service costs which offset lower energy prices, Statistics Canada said on Friday.
But the stronger-than-expected inflation reading was unlikely to encourage Bank of Canada to immediately raise interest rates, economists said.
"There is no urgency whatsoever for the Bank to move," Doug Porter, chief economist at BMO Capital Markets said. "We've been looking for two rate hikes later this year, and I stress the word 'later'. We've got them going in July and December."
The Canadian dollar CAD=D4 got a mild boost from the inflation data, edging up to touch 1.3241 to the U.S. dollar.
The median forecast of analysts surveyed by Reuters was for the consumer price index to be -0.4 percent for the month, and annual inflation of 1.7 percent in December.
"I wouldn't read too much into it," said Andrew Kelvin, senior rates strategist at TD Securities. "There was a big boost from air travel again, so that's something we would expect to unwind in the coming months. What's more important is that the core inflation metrics were stable and we did have a bit of a downward revision to the median core CPI metric."
Last week, the Bank of Canada held rates steady as expected but said more increases would be necessary even though low oil prices and a weak housing market will harm the economy in the short term.
The central bank cut its near-term growth forecasts to reflect the impact of crude prices but said the slowdown should be temporary and predicted the economy would post above-potential growth in 2020.
The bank has raised rates five times since July 2017 and as recently as last month said the pace of tightening could be sped up depending on economic data.
The bank noted that much of the economy was operating close to capacity but said consumption spending and housing investment had been weaker than expected as housing markets adjusted to tougher mortgage rules and higher interest rates.
Percent changes
Month-on-month
Year-on-year
Dec
Nov
Dec
Nov
CPI - all items
-0.1
-0.4
+2.0
+1.7
CPI - common
n/a
n/a
+1.9
+1.9
CPI - trim
n/a
n/a
+1.9
+1.9
CPI - median
n/a
n/a
+1.8
+1.8
Bank of Canada core
-0.2
-0.2
+1.7
+1.5
All items ex food/energy
+0.1
-0.3
+2.3
+1.7
Goods
-0.7
-0.7
+0.2
+0.5
Services
+0.5
-0.1
+3.5
+2.7
Energy
-3.7
-4.8
-3.7
-1.3
Seasonally adjusted
-0.2
-0.1
n/a
n/a
Bank of Canada core
seasonally adjusted
+0.2
+0.1
n/a
n/a
NOTE: None of the figures except those in the last two lines are seasonally adjusted. The median prediction of analysts surveyed by Reuters was for the consumer price index to be -0.4 percent for the month, and annual inflation of 1.7 percent in December.