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OTTAWA: Canada's inflation dropped to the lowest level in eight months in June, as lower gasoline, clothing and footwear prices combined to push the annual rate down to one per cent.

It was the second month in a row that Statistics Canada reported its consumer price index had dropped by four-tenths of a point, a significant decline.

For the past few years, the volatile energy component has pushed the overall inflation rate all over the map, taking inflation higher during the run-up of oil prices and lower when crude plunged with the 2008-9 recession.

In June, the overall energy component of the consumer price index was up but gasoline prices were lower by 2.9 per cent from where they were a year earlier.

Prices rose year-over-year in seven of the components measured by Statistics Canada, the only exception being clothing and footwear, which declined 1.8 per cent.

But the increases in the majority of the components were modest: Food prices rose 0.7 per cent; household operations 1.2 per cent; transportation one per cent, and shelter costs 1.6 per cent as home prices increased by 5.2 per cent, but mortgage costs fell by five per cent.

And the much-watched Bank of Canada underlying or core inflation index slid one-tenth of a point to 1.7 per cent, well within the central bank's target range.

The tame inflation reading could give the Bank of Canada breathing room as it decides whether to raise its key interest rates again.

The central bank hiked its benchmark interest rate to 0.75 per cent on Tuesday, saying the increase was necessary to keep inflation expectations on target.

The bank noted inflation is expected to pick up in future months due to the introduction of the harmonized sales tax in Ontario and British Columbia in July, but said that one-time change would considered when deciding monetary policy.

Statistics Canada said the main pressure on the core index, which excludes volatile items such as energy, came from higher prices for passenger vehicles, insurance, homes, and electricity and telephone services.

Regionally, Ontario experienced the biggest increase in consumer prices, which rose by 1.6 per cent. Price inflation was lowest in Manitoba, which saw an overall decrease of 0.2 per cent.