OTTAWA - Statistics Canada says annual inflation tumbled to 1.2 per cent last month, the lowest the consumer price index reading in almost two years.
Economists had expected the consumer price index to fall to 1.5 per cent in May from the previous month's two per cent due to declining gasoline prices from a year ago. Gasoline prices did indeed fall in May, by 2.3 per cent from last year at this time, the first year-over-year decline in 23 months.
Meanwhile, Statistics Canada says decreases in women's clothing and slower prices at auto dealerships were also factors.
On a month to month basis, prices slipped 0.1 per cent from April.
Bank of Canada governor Mark Carney said this week that he expected prices to dip below the bank's two per cent target in the short term, given the recent tumble in world oil prices. In comparison, oil had been rising at this juncture last year.
The softening trend in inflation removes most of the pressure on Carney to hike interest rates in the short term.