The annual inflation rate cooled to 1.3 percent in May, below forecasts for 1.5 percent, pushing it further away from the Bank of Canada's 2 percent target as the cost of food fell and gasoline prices moderated, data from Statistics Canada showed.

The central bank's three measures of core inflation remained subdued.

"It is going to be very difficult for the Bank (of Canada) to hike as soon as next month when you still haven't carved out a bottom on inflation," said Derek Holt, head of capital markets economics at Scotiabank.

Chances of a hike in July fell to just 20 percent from one-in-three before the inflation report, data from the overnight index swaps market showed.