Lower gas prices pulled Canada's annual inflation rate in November down to 1.7%, the first time in 10 months it has been below the Bank of Canada's 2.0% target, underscoring market expectations that imminent interest rate hikes are off the table.

The market had forecast the annual rate would fall to 1.8% from 2.4% in October. November's rate matched the 1.7% seen in January 2018.

The Bank of Canada, which has raised rates five times since July 2017 as the economy strengthened, said earlier this month that economic data heading into the fourth quarter had been weaker than expected.

The central bank is due to announce its next interest rate decision on January 9 and markets expect no change.

Statistics Canada said on Wednesday that gasoline prices fell by 5.4% from November 2017 on lower crude prices and overall energy costs dropped by 1.3% over the same period. In both cases, it was the first year-over-year decline since June 2017.

It also noted that the Bank of Canada's three core inflation measurements came in at 1.9%, the first time they have all been below 2.0% since June 2018.

The drop in the overall annual rate was the sharpest in absolute terms since May 2012, when lower gas prices pulled it down to 1.2% from 2.0% in April.

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