(Adds details from report, background, quotes, byline)
By Leah Schnurr
OTTAWA, June 17 (Reuters) - Canada's annual inflation rate
cooled in May on cheaper gasoline and a slowdown in price
increases for food, but the Statistics Canada data was not
expected to move monetary policymakers from the sidelines.
The annual rate declined to 1.5 percent from April's 1.7
percent, Statistics Canada said on Friday. That was a tad short
of economists' expectations for 1.6 percent.
Inflation remained comfortably below the Bank of Canada's 2
percent target and gave policymakers room to remain
accommodative.
The annual core inflation rate, which strips out some
volatile items, was closer to the midpoint of the central bank's
1 percent to 3 percent range, dipping to 2.1 percent from 2.2
percent.
The Canadian dollar slightly trimmed its gains against the
greenback immediately following the data, but investors were
more focused on Britain's upcoming referendum on whether to stay
in the European Union. CAD/
Since the Bank of Canada has repeatedly said temporary
factors are influencing inflation, it is likely to focus more on
the choppy economic growth expected over the second and third
quarters, economists said.
The central bank said earlier this week that the economy was
likely to be flat or contract slightly in the second quarter
because of recent wildfires in Alberta that disrupted oil
production. The third quarter is then expected to show an
outsized rebound.
"The Bank of Canada's main focus in terms of the outlook for
growth is monitoring the impact of the (oil) shutdowns and
activity outside of the energy sector," said Paul Ferley,
assistant chief economist at Royal Bank of Canada.
"I think it's very much going to just stand on the sidelines
monitoring the data."
After cutting rates twice last year, the central bank is
seen holding them steady at 0.5 percent until well into 2017. It
makes its next interest rate decision on July 13. CA/POLL
Excluding gasoline, whose prices were down 7.1 percent in
May from a year earlier, the consumer price index was up 1.9
percent.
Food prices were up 1.8 percent, their smallest annual gain
since March 2014 and a significant slowdown from April's 3.2
percent increase. Prices for fresh fruit and vegetables, as well
as food purchased at restaurants, all decelerated.
All of the index's eight major components rose, although
half of them showed smaller annual gains than in April.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic - Canada inflation, central bank rate: http://link.reuters.com/cut67s
Graphic - Canada economic dashboard: http://graphics.thomsonreuters.com/15/sc-canada/index.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>