The Canadian dollar gained against the greenback and was trading at C$1.3253 or 74.45 US cents after Thursday's report.
"Nonetheless, a continuation of above-trend economic growth should reduce slack and help turn inflation higher over the second half of this year, allowing the Bank of Canada to nudge up the overnight rate in October".
Last month's 5.5 per cent fall in electricity prices was one of the biggest downward contributors and recent changes in Ontario's hydro rates appear to have had an impact on the national number.
Figures released Friday by Statistics Canada showed that the inflation rate hike was down from a 1.6% annual pace in April.
The central bank has now raised interest rates six times since Donald Trump won the USA presidential election in November, plunging the Mexican economy into uncertainty because of his vows to overhaul the North American Free Trade Agreement (NAFTA).
Rita Ora volunteers to help victims of Grenfell Tower fire
Rita had previously taken to Instagram to say that she had played in the tower block as a child while growing up in the area. She later posted on Instagram: 'This is my neighbourhood I can't believe this is happening .
Number crunchers say the cost of gas across the country rose 6.8 per cent last month - well below the almost 16 per cent jump posted in April - and the slowdown, along with lower prices for things such as Internet access services, nudged inflation downward.
On a year-on-year basis, the consumer price inflation slowed to 1.3 percent in May from April's 1.6 percent.
Canada's housing market has been robust, with sales and starts rising in the first months of 2017, though activity has cooled in Toronto since the provincial government imposed in late April a foreign buyers tax in Canada's largest city and surrounding areas as part of an effort to rein in the market.
Compared to a year earlier, Statistics Canada said the price of electricity in the country's most-populated province fell last month by 16.1 per cent.
"No matter where you look, overall inflation is roughly 1.3 per cent in Canada at this point", Porter wrote in a note to clients.