The annual inflation rate in Canada unexpectedly dropped to 2.8% last month, amid sharp declines in mobile phone and internet services as well as a slowdown in grocery price growth.

The Canadian Statistics Agency released the Consumer Price Index report for February today, Tuesday, which shows a decline in price growth for the second consecutive month.

Economists widely expected the inflation rate in Canada to rise above 2.9 percent in January, partly due to rising gasoline prices.

The federal agency says wireless service prices fell by 26.5% and internet prices dropped by 13.2% compared to last year.

Grocery store food prices rose by 2.4% in February compared to last year, marking the first time grocery prices increased more slowly than overall inflation since October 2021.

However, this does not comfort Canadians who continue to pay much higher prices for food than they did a few years ago. The federal agency says grocery prices have increased by 21.6% between February 2021 and February 2024.

Meanwhile, housing costs continue to exert upward pressure on inflation, with mortgage interest costs rising by 26.3% and rent by 8.2% annually.

Nevertheless, Tuesday's report brings good news for the Bank of Canada, which is looking for more evidence that inflation is sustainably heading toward the country's 2 percent target before it moves to cut interest rates.

Core inflation measures favored by the central bank, which exclude price volatility, also fell last month.

Economists widely expect the Bank of Canada to begin cutting the key interest rate in June.