Canadian consumer prices rose 0.2% for March compared with consensus expectations of a 0.4% increase for the month and followed a 0.2% increase for February.
The headline year-on-year rate declined to 1.6% from 2.0% previously compared with expectations of a 1.8% rate while the core year-on-year rate declined to 1.3% from 1.7%.
Food prices rose 0.1% on the month with a 1.9% decline over the year.
Transport prices declined 0.6% on the month as gasoline prices dipped lower, but there was a 4.6% increase in prices over the year.
Shelter prices rose 2.2% over the year, although the monthly increase in prices was held to 0.1% which suggests some underlying slowdown in pressures.
Clothing and footwear prices rose a sharp 2.4% on the month, although this was related to seasonal factors and there was an annual decline of 0.9%.
Goods prices increased 0.8% over the year while services-sector prices rose 2.2% following a 0.3% monthly increase for March.
As far as core inflation is concerned, the CPI-Common remained at 1.3% while the CPI-Median edged lower to 1.7% from 1.8% with the CPI-Trim at 1.4% from 1.5%.
In its April Monetary Policy Report, the Bank of Canada expected that the inflation rate would gradually decline towards 1.7% over the next few months before returning to the 2.0% target rate over the subsequent few months.
Although there is some evidence of increased services-sector inflation, the data overall is slightly below central bank expectations and will not push the Bank of Canada towards any tightening of monetary policy.
The Canadian dollar weakened after the data with USD/CAD again testing the 1.3500 resistance area before retreating to 1.3485.