Consumer prices rose 2.3% year-on-year (year-on-year) in Canada in March, a hair below the consensus estimate of 2.4%, but up from 2.2% in January. Price growth edged down on a month-on-month basis (seasonally adjusted), rising 0.1% (from 0.2% in February).
Energy prices (+7.5 y/y) and gasoline (+17.1% ) in particular were a key contributor to the headline gain in inflation. Elsewhere it was a pretty mixed bag. Year-on-year inflation accelerated for half of the major categories and decelerated for the other half. The same story was true month-on-month price growth, with declining prices for clothing and footwear (-0.6%, seasonally adjusted) and household operations (-0.2%) offsetting decent gains for health and personal care (+0.7%), recreation and education (+0.6%), and tobacco and alcohol (+0.9%)
The Bank of Canada’s core price measures were largely unchanged, with only CPI-trim edging down to 2.0% (from 2.1%), while CPI-median remained unchanged at 2.1% and CPI-common at 1.9%.
Key Implications
After some excitement at the move higher in inflation in February, price pressures appear to have settled down a touch in March. Outside of energy prices, which will continue to put upward pressure on inflation given recent gains in oil prices, price growth was tepid in March.
With the Bank of Canada upgrading its outlook for inflation and noting temporary factors as the reason for near-term strength, there is a high bar for inflation to jump over to get the central bank to move faster on raising interest rates. Still, one more hike is likely on tap this year, consistent with the improved outlook for future economic growth, both globally and domestically.
