The Canadian dollar fell against most major currencies on Monday following the release of weaker-than-expected inflation data.

Government data showed that Canadas annual inflation rate eased to 2.2% in October, as gasoline prices declined, food inflation slowed, and mortgage-interest costs dropped below 3%, according to official figures released Monday.

The removal of the carbon tax on gasoline earlier this year continued to weigh on the annual pace of price increases in recent months. Excluding the effect of the carbon-tax repeal, the consumer price index rose 2.7% in October after 2.9% in September, according to Statistics Canada.

Analysts polled by Reuters had expected inflation to come in at 2.1% for October, down from 2.4% in September. On a monthly basis, they forecast a 0.2% increase. The monthly inflation print matched expectations.

Stable inflation readings were one of the main reasons the Bank of Canada signaled last month that it would pause rate cuts. A further slowdown in October is likely to reinforce its confidence in keeping the benchmark interest rate unchanged at 2.25% next month.

A steeper drop in gasoline prices during October pushed the annual decline in fuel prices to 9.4%, compared with a 4.1% drop in September.

Food inflation rises 3.4% in October

A slowdown in food-price growth up 3.4% in October versus 4.0% in September also contributed to the overall cooling in inflation. Despite moderating, food prices remain elevated and have exceeded the headline inflation rate for nine consecutive months, according to Statistics Canada.

Mortgage-interest costs, a key component of housing inflation, rose 2.9% year-over-year in October, the first time in more than three years that the increase fell below 3%.

However, rent inflation another major housing component accelerated for the second month in a row, rising more than 5%.

Due to price volatility and the effects of government tax changes, the Bank of Canada and economists closely watch core inflation indicators to assess underlying price trends.

One core gauge, the trimmed-mean CPI, eased to 2.9% in October from a downward-revised 3.1% in September. Another measure, the CPI-median which tracks the middle component of the price basket dipped slightly to 3.0% from 3.1%.

Andrew Grantham, senior economist at CIBC Capital Markets, wrote: It will take a longer period of easing price pressures, along with signs that economic growth is slipping again, before the Bank of Canada resumes rate cuts.

The Canadian dollar slipped modestly after the data, trading 0.11% lower at 1.4035 to the U.S. dollar (71.25 U.S. cents). Two-year government bond yields fell 0.3 basis points to 2.475%.

Price increases in October were driven mainly by higher costs for mobile-phone plans and insurance.

In trading, the Canadian dollar fell 0.2% against the U.S. dollar to 0.7117 by 19:42 GMT.

Australian dollar

The Australian dollar fell 0.6% against the U.S. dollar to 0.6495 by 19:43 GMT.

U.S. dollar

The U.S. dollar index rose 0.2% to 99.5 by 19:34 GMT, after touching a high of 99.5 and a low of 99.2.