Canada’s CPI rose 2.4% in March as energy surged, while economists say core pressures stayed contained
The inflation rate accelerated in March as a sharp run-up in gasoline prices pushed headline consumer costs higher, but several Bay Street economists said the underlying picture remained more restrained than the topline figure suggested.
Statistics Canada said the Consumer Price Index rose 2.4% year over year in March, up from 1.8% in February. On a monthly basis, CPI increased 0.9%, with higher energy costs doing much of the work. Gasoline prices climbed 5.9% from a year earlier and surged 21.2% from February; the largest monthly increase on record and tied to a supply shock stemming from conflict in the Middle East.
Strip out gasoline, however, and the pace of inflation looked less intense. Statistics Canada said CPI excluding gasoline rose 2.2% year over year in March, slower than the 2.4% increase recorded in February. Grocery prices still moved higher, with food purchased from stores up 4.4%, while shelter inflation came in at 1.7%.
RBC said the March report pointed to an energy-driven rebound in headline inflation rather than a broad-based resurgence in price pressures. The bank said the rise to 2.4% was “primarily driven by higher energy prices” while “broader underlying inflation pressures showed further signs of easing under the surface,” adding that the Bank of Canada’s preferred core measures remained consistent with cooling momentum.
TD Economics struck a similar tone, saying oil prices were the main force behind the March increase and noting that inflation excluding energy was a more modest 2.2%. TD also said the Bank of Canada’s median and trim measures eased slightly to 2.3% year over year, with three-month trends continuing to run below the central bank’s 2% target.
At BMO, economists said the March reading was “not great, but less bad than feared,” arguing that while the gasoline spike was dramatic, core inflation came in softer than expected. BMO noted that median held at 2.3% year over year and trim slipped to 2.2%, which it described as a five-year low, while the breadth of core inflation also moderated.
Scotiabank was less relaxed about the details beneath the headline. Economist Derek Holt argued markets were too focused on the softer-than-expected topline result and not enough on signs that some core and breadth measures strengthened in March. He said the report offered tentative evidence that Canada could be emerging from a temporary soft patch in underlying inflation, even if one month of data was not enough to change the broader policy picture.
CIBC said the inflation jump was smaller than expected and that there was still little evidence, for now, of widespread pass-through from higher oil and gasoline prices into the rest of the basket. The bank said that could become more visible over the summer, especially in areas such as airfares, but added that slack in the Canadian economy should help keep domestically driven services inflation in check and allow the Bank of Canada to stay on hold through 2026.
The March report also continued to reflect distortions from earlier tax changes. Statistics Canada said lingering base-year effects from the temporary GST/HST break continued to put downward pressure on headline inflation in March, while RBC and TD both pointed to last year’s tax changes as reasons the current inflation picture still needs to be read with caution.
