July 21, 2017 / 12:42 PM / a year ago

UPDATE 1-Canada's annual inflation rate slows, but core measures pick up

(Adds details from report, background)

OTTAWA, July 21 (Reuters) - Canada’s annual inflation rate slowed to a 20-month low of 1.0 percent in June, well below the Bank of Canada’s 2.0 percent target, although core measures showed signs of strength, Statistics Canada said on Friday.

The overall rate - which matched the forecast of analysts in a Reuters poll - was the lowest since the 1.0 percent recorded in October 2015.

The central bank last week raised interest rates for the first time in nearly seven years, citing the need to look through soft inflation. It also vowed to wait for more economic data before committing to its next move.

The drop in the overall inflation rate was driven by lower gas prices, which fell 1.4 percent in the 12 months to June after increasing by 6.8 percent on an annual basis in May.

Two of the three measures of core inflation the Bank of Canada introduced last year posted gains. CPI common, which the central bank says is the best gauge of the economy’s underperformance, edged up to 1.4 percent from 1.3 percent.

CPI median, which shows the median inflation rate across CPI components, rose to 1.6 percent from 1.5 percent while CPI trim, which excludes upside and downside outliers, stayed at 1.2 percent.

Reporting by David Ljunggren; Editing by Bernadette Baum

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