OTTAWA, Feb 21 Reuters Canada39;s annual inflation rate eased more than expected in January to 5.9, data showed on Tuesday, which should allow the Bank of Canada to keep interest rates steady at its next meeting while it lets previous rate hikes sink in.

Analysts had expected inflation to edge down to 6.1 from 6.3 in December. Month over month, the consumer price index rose 0.5, Statistics Canada said, again lower than analysts39; forecast of a 0.7 gain, after a 0.6 decline in December.

Statscan cited a base effect, or comparison with last year39;s strong result, that should persist through June. In January 2022, prices surged at a time of RussiaUkraine tensions and supply chain disruptions, and they increased to a peak of 8.1 in June.

The inflation figure allows the Bank of Canada to stay on hold in March, despite the fact that the labor market was extraordinarily hot in the month of January, said Andrew Kelvin, chief Canada strategist at TD Securities.

The Bank of Canada in January raised its benchmark interest rate to a 15year high of 4.5 and became the first major central bank to say it would hold off on further increases as long as prices eased in line with its forecast.

Then Canada39;s economy smashed expectations by adding a net 150,000 jobs in January, data showed earlier this month.

Before the inflation figures were released, money markets saw a 100 chance for another rate increase this year. Now they see a roughly 80 chance.

The bank forecasts inflation…