Canada’s dollar pared its drop as a government report showed the annual rate of inflation was higher in August than economists forecast. The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, depreciated 0.1 percent to 99.40 cents per U.S. dollar at 7:02 a.m. in Toronto, from 99.27 cents yesterday. The currency earlier slid 0.3 percent. Consumer prices advanced 3.1 percent in August from a year earlier after a 2.7 percent gain in the previous month, Statistics Canada said today in Ottawa. The median forecast of 26 economists in a Bloomberg News survey was for a 2.9 percent annual pace. Bank of Canada Governor Mark Carney said yesterday in Saint John, New Brunswick, that borrowing costs may stay low beyond when full output is restored. He said the domestic recovery will be hobbled by a weak U.S. economy. Speculation that the Bank of Canada will raise its benchmark overnight target rate from 1 percent this year has faded on concern the global economy may be headed for a recession, crimping Canadian exports. The central bank on Sept. 7 kept its main interest rate unchanged for an eighth meeting and said there is a “diminished” need for an increase as Europe’s fiscal crisis and a slow U.S. rebound hobble the global recovery. Canada’s economy, the world’s 10th largest, shrank at a 0.4 percent annualized pace in the second quarter, the national statistics agency said Aug. 31. It was the first contraction since the recession two years ago. The International Monetary Fund cut Canada’s economic growth forecast yesterday to 2.1 percent for this year from 2.9 percent, citing weaker demand from the U.S., the nation’s biggest trade partner, and slower government spending. To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net. To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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