Headline inflation eased to 2.3% year-over-year in March, down from 2.6% in February and below economists’ expectations.
Canada’s annual inflation decline was largely driven by lower prices for travel tours (-4.7%, down from +18.8% in February), gasoline (-1.6%), airfares (-12%), and cellular services (-8.8%).
Offsetting some of the slowdown was the end of the GST/HST holiday on February 15. March marked the first full month with federal taxes reinstated, driving up prices for food purchased at restaurants (+3.2% year-over-year, compared to -1.4% in February).
Rising shelter costs also limited the overall decline in inflation, with prices up 3.9% year-over-year and 0.2% on a monthly basis.
Helped by earlier Bank of Canada rate cuts and declining fixed mortgage rates, mortgage interest costs dropped to 7.9% in March from 9.0% in February.
On a month-to-month basis, the Consumer Price Index rose 0.3% in March. However, after seasonal adjustment, StatCan said CPI was effectively unchanged.
The Bank of Canada’s preferred core inflation measures—CPI-trim and CPI-median—remained elevated at 2.8% and 2.9%, respectively, suggesting underlying price pressures persist. By contrast, CPI excluding food and energy came in closer to headline inflation at 2.4% year-over-year, with a seasonally adjusted monthly gain of 0.2%.
“Today’s inflation report gave some reprieve from the ongoing threat of higher prices,” TD’s James Orlando wrote in a research note.
“Looking forward, April should show further easing of inflation as the elimination of the carbon tax has pushed energy prices significantly lower,” he added. “That should more than offset the impact of tariffs, but not forever.”
BoC rate cut still uncertain as policymakers weigh inflation and trade risks
Despite the softer inflation print, experts remain unsure whether it will tip the scales for the Bank of Canada’s upcoming rate decision, given persistent trade tensions.
Scotiabank’s Derek Holt was blunt in his assessment, writing that the data “has little ability to influence the next day’s BoC decision.”
BMO’s Douglas Porter struck a more cautiously optimistic tone, noting that the sharp decline in global oil and Canadian gasoline prices could support a rate cut—though not without important caveats.
“Normally, this would be a big green light for the BoC to cut tomorrow, except the small detail that their major core measures are holding close to 3% (so with the overnight rate having been slashed to 2.75%, real rates are already negative) and policymakers are operating in the dense fog of an ever-shifting trade war,” he wrote.
Among the three, TD’s James Orlando remains the most bullish on a cut, noting that the BoC is likely balancing tariff-related inflation risks with mounting economic headwinds, including job losses, low business confidence, and housing market weakness.
“We are maintaining our call for another cut from the bank, as it should take out more insurance against the mounting downside risks to the economy,” he said.
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Last modified: April 15, 2025