Canada Oct Monthly CPI Falls The Most Since 1959

October Inflation Report

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Key Numbers ! !

Oct. Sept. !Consensus: !

Core Inflation y/y* +1.7% +1.7% !Core +1.9% y/y; !

Core Inflation m/m* -0.2% +0.4% !headline +3.1% !

All-items CPI y/y +2.6% +3.4% ! !

All-items CPI m/m -1.0% +0.1% !Actual: +1.7% !

!core; +2.6% !

!headline !

*Bank of Canada definition ! !

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By Nirmala Menon

Of Dow Jones Newswires

OTTAWA (Dow Jones)--Inflationary pressures in Canada eased faster than expected with the consumer price index in October falling at the sharpest monthly rate in nearly 50 years as gasoline prices declined, giving the central bank room to cut interest rates further to shore up an economy that could slip into a recession.

The headline or all-items consumer price index shrank 1.0% from September, the most since June 1959, slowing the year-on-year rate to 2.6% from 3.4%, the lowest reading since May, Statistics Canada said Friday. The market had expected the monthly rate to fall 0.6% and a year-on-year pace of 3.1%. The yearly rate slowed the most since August-September 2006.

The core CPI, which strips out prices of eight volatile components including energy and some food prices, fell 0.2% month-on-month to hold the year-on-year rate steady at 1.7%. The market had expected a flat monthly reading and yearly gain of 1.9%.

Bank of Canada Governor Mark Carney said Wednesday risks to growth and inflation have shifted to the downside in the one month since the central bank slashed forecasts and cut the benchmark overnight rate to 2.25%, the lowest in four years. More interest rate cuts will likely be required, he said.

"Recession is a possibility in Canada," Carney told reporters in London. The Bank has cut the overnight rate by 2.25 percentage points since December 2007.

The Canadian dollar fell immediately after the data were published at 7:00 a.m. EST. The U.S. dollar rose to C$1.2803 from C$1.2795 just before the release.

Web site: http://www.statcan.ca

-By Nirmala Menon, Dow Jones Newswires; 613-237-0668; nirmala.menon@dowjones.com

November 21, 2008 07:04 ET (12:04 GMT)