UPDATE 2-Canada Nov inflation eases beyond expectations

* Annual inflation rate 2 pct vs 2.4 pct in October

* Core CPI rate eases to 1.4 pct year-over-year

* Energy, food and clothing cause 12-month decline

* Bank of Canada seen holding rates steady
(Adds market reaction, analysts)

By Louise Egan

OTTAWA, Dec 21 (BestGrowthStock) – Canada’s annual inflation rate
slowed more than expected in November from a two-year high in
October, providing relief for the central bank as it seeks to
keep interest rates low to support the still-fragile recovery.

The consumer price index edged up 0.1 percent in the month
for an annual rate of 2 percent, Statistics Canada said on
Tuesday. That was down from 2.4 percent annual inflation in the
previous month and below the market forecast of 2.2 percent,
pushing the Canadian dollar to a session low.

Statistic Canada attributed the year-over-year deceleration
to energy, food and clothing prices.

The core rate most closely watched by the Bank of Canada
was unchanged in the month and rose 1.4 percent on the year,
compared with 1.8 percent in October.

The results supported the view that the central bank, which
targets 2 percent inflation, will hold rates steady into early
2011.

“Essentially what this report does is reverses any concern
that may have built up a month ago,” said Doug Porter, deputy
chief economist at BMO Capital Markets. “It was quite muted
across the board and we saw broad-based pullbacks in both
headline and core inflation,”

The bank kept interest rates on hold at 1 percent this
month for the second consecutive time after raising borrowing
costs three times between June and September.

The Canadian dollar (CAD=D4: ) fell to a session low after
the report at C$1.0205 to the U.S. dollar, or 97.99 U.S. cents,
from C$1.0190 to the U.S. dollar, or 98.14 U.S. cents, just
prior to the data.

Canadian government bond prices rose across the curve.

Analysts surveyed by Reuters earlier this month predicted,
on average, that the central bank would not hike rates again
until the second quarter of next year.

Markets were pricing in a 89.3 percent probability of rates
staying on hold in January, up slightly from 89.1 percent prior
to the report, according to overnight index swaps tracked by
Reuters. (BOCWATCH: )
(Additional reporting by Howaida Sorour, Ka Yan Ng and John
McCrank; editing by Jeffrey Benkoe)

UPDATE 2-Canada Nov inflation eases beyond expectations