Canadian CPI comes in at 2.9% in March

One step forward, two steps back – that seems to be the overarching theme for Canada’s inflation fight.

The March report released this morning by Statistics Canada shows the Consumer Price Index (CPI) rose 2.9% on an annual basis – a tick higher than the 2.8% recorded in February – and up 0.6% monthly.

Rising gas prices were the main culprit behind the year-over-year rise; stripping them out of the equation would bring the headline inflation number down to 2.8%, says StatCan.

Mortgage interest costs continue to lead inflation growth

Shelter inflation, which is comprised of mortgage interest costs and rents, continues to be the largest contributor to the overall CPI basket of goods, rising 6.5% from 2023. Mortgage interest, specifically, is up 25.4%, while rents climbed 8.5%. “Among other factors, a higher interest rate environment, which can create barriers to homeownership, put upward pressure on the index,” reads StatCan’s report.

Food prices, however, continue to improve, rising just 1.9% year over year – a drastic turnaround from the double-digit percentage increases seen throughout 2023.

We’re still on track for rate cuts come June

While the “headline” inflation number increased, economists are pointing to this report as a positive one that continues to support the possibility of a June Bank of Canada rate cut. The “core” measures of inflation – called the trim and median – are key metrics monitored by the Bank, and both showed improvement in March, down to 2.8% and 3.1%, respectively. 

“Despite the rise, details in the report continue to point to price pressures broadly unwinding,” writes Royal Bank of Canada economist Claire Fan in an economic note. 

“The Bank of Canada’s preferred ‘core’ measures that are designed to gauge broader underlying price growth all showed further improvement. CPI trim and median both eased and averaged below the top end of the 1% - 3% inflation target for the first time since inflation started to rise more substantially, around the summer of 2021.” 

Doug Porter, Chief Economist and Managing Director of Economics at Bank of Montreal, writes that while there is still one more inflation report before the central bank’s June 5 announcement, the data overall supports a cut come June.

“It seems strange that a near-3% headline inflation result, coupled with a 0.6% monthly rise, would pass off as good inflation news these days. But the steady cooling in core inflation is welcome news indeed, with now three of the four measures of core below 3% for the first time since the summer of 2021,” he writes. “For the Bank of Canada, this result is likely just good enough to keep them on track for a potential trim in June. We'll get one more CPI before that decision, as well as Q1 GDP—and today's federal budget of course—but odds are leaning to a June move for now.”

Also read: 

• Rising home prices made it more challenging to buy a home in March
• Canadian February CPI falls to 2.8%
• Bank of Canada holds target interest rate at 5% in April 2024 announcement