Canada's Inflation Dips to Near Zero

Canada's annual inflation dropped to 0.1% in May, a near deflation level. This was the lowest Canadian inflation has been since November 1994, when it fell to minus 0.1 per cent.

The main reason for the decline was the falling oil adn energy prices, but only because last year they were at near record highs and have since dropped. Since Oil peaked at over US$145 a barrel in July of last year, there will be at least one more month of near deflation levels.

Excluding the trasportation component, inflation in Canada remains close to 2.3%, which is where the Bank of Canada wants it. Core inflation, which excludes volatile items, was exactly at the bank's 2% target.

"The decline in the energy price index was due more to high prices in 2008 than to recent market developments," the agency said, pointing out that from April energy prices were actually 4.4 per cent lower.