By Paul Vieira 

OTTAWA -- Canada's annual inflation rate accelerated in January, driven by higher gasoline prices, although there are signs upward price pressure might be waning.

Canada's consumer-price index climbed 2.4% on a year-over-year basis in January, Statistics Canada said Wednesday. Market expectations called for a 2.3% rise, according to economists at TD Securities.

On a month-over-month basis, CPI climbed 0.3%.

The Bank of Canada's preferred measures for underlying inflation edged lower from the previous month, with the average core CPI for January at 2.03%, versus a revised 2.07% in the previous month. These core readings are designed to filter out volatile, month-to-month swings in prices. January marked the second straight month that the average core reading decelerated.

The Bank of Canada's task is to set interest rates at a level that achieves and maintains 2% inflation. In January, the central bank kept its benchmark interest rate unchanged at 1.75%, where it has been for over a year, but marked down its estimates for near-term growth. Bank of Canada Gov. Stephen Poloz also opened the door for a future rate cut if the domestic outlook deteriorates.

On-target inflation was an important reason the Bank of Canada remained on the sidelines in 2019 while many other developed-world central banks cut rates amid slowing global growth.

Economists said other underlying data in January, along with the core-inflation readings, point to softness in prices.

January's headline inflation rate of 2.4% was fueled by an 11.2% year-over-year jump in gasoline prices. The data agency said oil prices were low in January of last year because of a global supply glut. Statistics Canada added gasoline prices rose early in January because of geopolitical concerns in the Middle East. Later in January, oil prices retreated because of economic uncertainty caused by the coronavirus outbreak.

Excluding gasoline, Canada's annual inflation rate rose 2% in January. When food and energy are excluded, CPI rose 1.9%, or below the Bank of Canada's target.

"The positive contribution to inflation from higher oil prices will certainly unwind in February, bringing the headline rate down with it," said James Marple, an economist at TD Bank. He added the average price for a barrel of U.S. crude is down 12% so far in February from the average price for all of January.

Mr. Marple said the downside risks to the Canadian economy have intensified in recent weeks, citing the outbreak of the coronavirus hitting global growth and commodity prices, and rail blockades in eastern Canada that have upended the country's logistical network.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

February 19, 2020 10:19 ET (15:19 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.