UPDATE 1-Canada inflation ticks higher in July on higher gas prices

(Adds details from the report, background)

OTTAWA, Aug 18 (Reuters) - Canada's annual inflation rate ticked up to 1.2 percent in July, but remained well below the Bank of Canada's 2.0 percent target, as transportation and shelter costs rose, Statistics Canada said on Friday.

The increase in the annual inflation rate from June's 20-month low of 1.0 percent matched analysts' expectations and likely gives the central bank room to raise interest rates again this fall after a July rate hike.

Two of the three measures of core inflation the Bank of Canada set last year also ticked higher.

The rise in the overall inflation rate was driven by gas prices, which jumped 4.6 percent in the 12 months to July after falling 1.4 percent on an annual basis in June.

Shelter costs rose 1.3 percent, natural gas prices surged 9.7 percent and electricity costs fell 9.1 percent, largely due to legislated price declines in Ontario, Canada's most populous province.

CPI common, which the central bank says is the best gauge of the economy's underperformance, was unchanged at 1.4 percent, while CPI median, which shows the median inflation rate across CPI components, rose to 1.7 percent from 1.6 percent. CPI trim, which excludes upside and downside outliers, rose to 1.3 percent from 1.2 percent in June.

The central bank raised interest rates in July for the first time in nearly seven years, citing the need to look through soft inflation. It said it would wait for more economic data before committing to its next move on rates.

(Reporting by Andrea Hopkins; Editing by Bernadette Baum)