Inflation in Canada fell to 2.9 percent in January, leapfrogging forecasts after a small uptick the previous month, the national statistical agency said Tuesday.

Inflation had unexpectedly accelerated in December to 3.4 percent following a mostly steady decline from a recent peak of 8.1 percent in June 2022. Economists were expecting it to slow to 3.3 percent in January.

"Overall, price growth is clearly moving in the right direction," Desjardins analyst Tiago Figueiredo commented in a research note.

He maintained his prediction that the Bank of Canada, as a result of this and other indicators pointing to a slowing economy, will start lowering its key lending rate in June.

The central bank had in recent years hiked interest rates from a record low of 0.25 percent to 5 percent in a bid to tame soaring inflation.

Last month's inflation drop was led by lower prices for gasoline, which fell for a fifth consecutive month, Statistics Canada said in a statement.

Canadians have loudly lamented housing and grocery prices, prompting massive federal outlays for new home construction to ease a housing crunch and grocery store executives being hauled before a parliamentary committee to explain their pricing schemes.

But both showed signs of stabilizing after recent double-digit increases.

Housing costs were down slightly in January.

The costs of groceries, meanwhile, remained somewhat high, but price growth slowed. This deceleration was broad-based and included meat and dairy, bakery items and fresh fruits, while the costs of soup, bacon and shrimp fell.

Prices for airfares, travel tours and cellular services fell.

The costs of rent and mortgage interest, car insurance and electricity rose.