Annual consumer prices slows to an eightmonth low
Core inflation metrics ease to more than twoyear low
Money markets increase bets for June rate cut

OTTAWA, March 19 Reuters Canada39;s inflation rate surprisingly cooled in February to its slowest pace since June, and closelywatched core inflation measures eased to more than twoyear lows, data showed on Tuesday, prompting investors to increase their bets for a June rate cut.

Annual headline inflation cooled to 2.8 last month, beating analyst expectations for a 3.1 rise, and below 2.9 increase in January. On the month, the consumer price index rose 0.3, less than a forecast 0.6 rise, Statistics Canada said.

Money markets increased their bets for a first 25 basis point rate cut in June to more than 75, from 50 before the inflation data. The bets for an April rate cut increased to over 28 from 18 before the numbers were released.

We expect central bankers will sound more dovish in April, thereby setting up a ratecutting cycle beginning in June, said Royce Mendes, head of macro strategy for Desjardins Group.

The drop in inflation also weakened the Canadian dollar to a threemonth low, with the loonie trading 0.54 lower in the day at 1.3604 against the dollar, and Canadian government 10year bond yields fell 9.5 basis points to 3.502.

Canadians in February benefited from softer price growth in food purchased from stores, and a drop in prices of cellular plans and internet services, which were the main contributors to…