OTTAWA, Nov 21 Reuters Canada39;s annual inflation rate eased more than expected to 3.1 in October and core inflation measures edged down to their lowest levels in about two years, data showed on Tuesday, likely closing the door to further rate hikes.

Analysts polled by Reuters had forecast inflation to cool to 3.2 from 3.8 in September. Monthovermonth, Statistics Canada said the consumer price index was up 0.1, matching forecasts. The Bank of Canada BoC targets 2 annual inflation.

The deceleration in headline inflation could fortify investor bets that the BoC will start lowering its key policy rate from a 22year high of 5.00 in the first half of 2024.

The BoC39;s core measures of underlying inflation edged lower, with CPImedian dropping to 3.6 and CPItrim to 3.5, the lowest since December 2021 and November 2021, respectively.

This is exactly the type of progress that central bank officials have been waiting to see, said Royce Mendes, head of macro strategy at Desjardins Group. If the door wasn39;t already shut to additional rate hikes, it now should be.

The central bank has held rates steady in its last two meetings, but says it remains prepared to hike again if needed. The bank projects inflation to hover around 3.5 until mid2024, before trickling down to its 2 target in late 2025.

The Canadian dollar was trading 0.2 higher at 1.37 to the greenback, or 72.99 U.S. cents, after the data.

Dragging the annual inflation rate in October was a 7.8 drop in gasoline…