Canada's annual inflation rate rose to 2.9% in March, as expected, while a measure of core inflation continued to slow for a third straight month, based on data released on Tuesday.
Analysts polled by Reuters had forecast inflation to read 2.9% from 2.8% in February. Based on the monthly count, the consumer price index rose by 0.6%, the biggest increase since July 2023, but less than the expected increase of 0.7%.
The annual rate increase was driven by more expensive gasoline prices at the pump due to supply concerns and voluntary production cuts that pushed global crude oil prices higher, Statistics Canada reported. Excluding petrol, inflation slowed to 2.8% from 2.9% in February.
The Bank of Canada (BoC), which is trying to stabilize inflation to its 2% target, kept interest rates at 5% near a 23-year high last week, but said a cut in June was likely if the recent cooling trend in inflation continued.
Headline inflation has remained below 3% since January and is in line with the BoC's expectation of inflation readings close to 3% in the first half of 2024. CPI-median and CPI-trim – the bank's main measure of core inflation – slowed more than expected. CPI-median slowed to 2.8% from 3% in February while CPI-trim eased to 3.1% from 3.2%. Economists expect CPI-median to drop slightly to 3.0% and CPI-trim to remain at 3.2%.
The BoC raised rates by 475 basis points to a 22-year high between March 2022 and July 2023 and has maintained that level since then for six consecutive meetings in its bid to stabilize inflation. The BoC's next rate announcement is on June 5.
In March, property prices continued to put upward pressure on prices, with mortgage interest costs and the rental index accounting for the bulk of the annual increase in the all-items CPI, Statscan reported. Services inflation accelerated to 4.5% in March from 4.2% in February, driven by air transport and rentals, while goods inflation slowed slightly to 1.1% from 1.2%. Excluding volatile food and energy, prices rose by 2.9% compared with a 2.8% increase in February.
