Canada’s annual inflation rate unexpectedly slowed in March, offering a potential reprieve for the Bank of Canada amid ongoing discussions around monetary policy and rate cuts. The latest data showed that cost pressures cooled despite the expiry of a temporary federal tax break.
According to Statistics Canada, the consumer price index (CPI) rose 2.3% year-over-year in March, down from 2.6% in February. This figure was significantly below market expectations of a 2.7% rise, as forecasted by TD Securities economists. The easing was largely attributed to lower gasoline prices and reduced costs for airfares and travel tours.
On a monthly basis, headline CPI increased by 0.3%, falling short of the anticipated 0.7% gain. Seasonally adjusted, prices remained flat compared to the previous month, pointing to subdued momentum in consumer inflation.
Core inflation also moderated slightly. The average of the Bank of Canada’s two closely watched core inflation metrics—the trimmed mean and weighted median—eased to 2.85% from 2.9% in February. This marks a minor retreat from an eight-month high, suggesting underlying inflation pressures remain persistent but manageable.
The data could influence the Bank of Canada’s policy trajectory in the months ahead. While inflation remains above the central bank’s 2% target, the softer-than-expected readings may offer room for more dovish guidance, especially if economic activity shows further signs of slowing.
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