The consumer price index compiled by Statistics Canada was slightly higher than economists had anticipated, given that gasoline prices were known to have fallen during the month, but still at the low end of the central bank's target range.
Core inflation — which measures underlying price pressures by excluding volatile items such as energy — stood at 1.3 per cent in October, also below expectations.
Statistics Canada reported gasoline prices were down 1.2 per cent from September — not as big a decline as anticipated and still 4.0 per cent higher than a year earlier.
The consensus estimate had been for the annual inflation rate to fall to 1.1 per cent, which would have been the lowest since June 2010 when it was 1.0 per cent.
"Inflation remains a dead issue in Canada," said Derek Holt, vice president of economics with Scotia Capital.
"It's very early in the quarter with only October nailed down, but Q4 inflation is thus far undershooting Bank of Canada expectations."
Capital Economists analyst David Madani estimates core inflation will track close to one per cent in the coming months, well below the central bank's 1.6 forecast, and below the bank's two-per-cent target.
"Given the third-quarter economic slowdown and faltering global outlook, inflationary pressures will remain muted. Accordingly, short and long-term interest rates are likely to remain very low next year," he advised in a note to clients.
The principle risk to inflation down the road appears to be food prices, which on a seasonally adjusted basis rose 0.5 per cent from month to month. Analysts believe they could rise to about three per cent annualized by the middle of next year, from the current two per cent.
Despite the low inflation rate and concerns about the global economy, Bank of Canada governor Mark Carney has stuck to saying that interest rates are likely to rise at some point.
The statements seem primarily to be a warning to consumers, who have racked up record-high personal debt during a period of prolonged low borrowing costs.
But the housing market has cooled of late and economists don't expect Carney to make good on his cautionary language until very late in 2013 or more likely, sometime in 2014.
Overall, the Statistics Canada report issued Friday showed few trouble spots on the horizon for inflation, with most price increases coming in at a modest or moderating rates.
Meat cost 5.1 per cent more this October than last, yet food overall rose only two per cent. Property taxes hiked up 2.8 per cent, and homeowner replacement costs rose by 2.2 per cent.
However, mortgage interest costs decreased 2.6 per cent, natural gas fell 11.6 per cent, women's clothing shed 3.8 per cent, video equipment were 13.2 per cent lower, and computer equipment and software cost 4.6 per cent less last month than they did a year ago.
On a month-to-month basis, prices rose 0.2 per cent, the same increase as in the two previous months, as property taxes, fresh fruit and automobiles were higher, while gasoline, dairy products and mortgage costs were slightly lower than in September.
Regionally, inflation was highest in Newfoundland and Labrador at 2.2 per cent and lowest in British Columbia, where the annual increase in consumer prices was only 0.5 per cent.Suggest a correction