Canada's annual inflation rate sunk to 1.2 per cent last month, the lowest level in two years, driven mostly by plunging energy prices.
Statistics Canada released the latest Consumer Price Index numbers on Friday.
Just one month earlier in November 2008, the inflation rate was 2 per cent.
StatsCan said the rise in prices in December 2008, compared to the same month in 2007, was the smallest since January 2007.
Gas prices were largely to blame, the agency said. In December of last year, prices at the pump were 25.8 per cent lower than the same month a year earlier.
The gas price drop was the largest, year by year, since the gas price index was created in 1949.
In November 2008, the drop from the same month a year previous was 14.4 per cent.
"Excluding gasoline, the Consumer Price Index rose 2.6 per cent in the 12 months to December, down slightly from the 2.8 per cent increase in November," StatsCan said in a release.
"The 12-month change in the CPI was also tempered by on-going price declines for purchasing and leasing passenger vehicles, women's clothing and fuel oil and other fuels."
Douglas Porter, a senior economist with BMO Capital Markets, said at present inflation is "first and foremost a gas story."
"But starting in the next few months, we'll see a shift where price drops become more broad-based," he added.
Aron Gampel, deputy chief economist with Scotiabank, said inflation hasn't hit rock-bottom yet, and Canadians should prepare for further slowing.
"In the next month we're going to be talking about it going into negative territory on a more sustained basis," Gampel told CTV's Canada AM on Friday.
"It's mainly because the economy is weak and pricing power has been reduced. We cut prices to sell goods and of course energy prices have plummeted so much it's pulling the overall inflation rate down."
Porter said he thought it was unlikely, but not impossible, that Canada could eventually see deflation occur -- where a decrease in prices occurs for a prolonged period of time.
Bank of Canada governor Mark Carney called the risk of deflation "remote."
StatsCan said food prices are now the biggest contributor to inflation in Canada. Prices rose 7.3 per cent last month, and 7.4 per cent in November.
If food prices were excluded from the equation, inflation would have fallen to zero in December.
With files from The Canadian Press
