OTTAWA: Canada's annual inflation rate slowed to 0.7% in December from 1.0% the previous month amid a new round of COVID-19 lockdowns and declining costs of food and airplane tickets, Statistics Canada said on Wednesday.

Headline inflation was below analyst expectations for inflation to remain at November's 1.0% rate. Consumer prices fell 0.2% on the month.

"It's an unexpected slowdown in inflation," said Royce Mendes, a senior economist at CIBC Capital Markets. "Looking at the details, I don't think it much changes the thinking at the Bank of Canada."

The Bank of Canada is due to announce its latest position on rates on Wednesday, with analysts forecasting the benchmark to remain at 0.25%.

The Canadian dollar was trading 0.3% higher at 1.2692 to the greenback, or 78.79 US cents as investors bet on hefty US fiscal stimulus.

Two of the three core measures of inflation fell in December. The common measure, which the Bank says is the best gauge of the economy's underperformance, was unchanged at 1.8%.