Economists weighed in on March’s CPI surge and what it means for the Bank of Canada
Canada’s inflation pulse in March has two stories: a war‑driven jolt at the pumps and a quieter core that stays close to the Bank of Canada’s 2% target.
Headline CPI rose to 2.4% year over year from 1.8% in February, powered by a record monthly surge in gasoline prices, even as underlying measures continued to cool.
For mortgage professionals, that mix points to more of the same from policymakers – a central bank pinned at a 2.25% policy rate while borrowers grapple with higher living costs but no imminent rate relief.
Oil shock dominated the March data
Leslie Preston, managing director and senior economist at TD Economics, said March’s inflation pop was “as expected,” with higher oil prices doing the heavy lifting.
Headline CPI was up 2.4% year over year, but inflation excluding energy was a milder 2.2%.
Gasoline prices “soared 21% in March – the largest increase on record,” reversing February’s 9.3% annual decline in energy costs.
Preston also pointed to a looming base‑effect problem. Because last year’s readings still included the now‑removed federal consumer carbon levy, “the impact of energy on inflation is set to get much larger in next month's data,” she said – meaning April’s headline figure is likely to spike again even if demand stays soft.
Douglas Porter, chief economist at BMO, stressed that beyond the oil shock, “core was milder than expected,” keeping overall inflation slightly below consensus.
Median core held at 2.3% and trim eased to 2.2%, a five‑year low. In his words, “it could have been worse,” with the record jump in gasoline prices masking evidence that “underlying inflation was a bit better than expected.”
Core pressures stayed close to target
CIBC economist Andrew Grantham underlined that “everyone knew that inflation jumped in March due to higher gasoline prices,” but the key takeaway was that core “continued to show little sign of inflationary pressure outside of the surge in fuel prices.”
At RBC, economist Abbey Xu reached a similar conclusion. The rise in headline CPI to 2.4% was driven “primarily” by energy, but the Bank of Canada’s preferred core gauges, including trim services excluding shelter, averaged 1.7% on a three‑month annualized basis and showed “a continuation of the gradual easing trend in underlying inflation pressures.”
What it means for the next BoC move and mortgages
Preston said the Bank of Canada is widely expected to leave its key rate at 2.25% at the upcoming decision, arguing that a “generally soft economic backdrop” should contain the pass‑through from higher oil into core prices.
Porter went further, suggesting that “if it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of BoC rate cuts, not hikes.”
Grantham also expects the central bank to “remain on the sidelines through 2026,” even as headline inflation temporarily pushed above 3% in April on gasoline and tax base effects.
Xu’s assessment is that the March data “reinforced” the view that higher oil prices could push headline CPI higher near term “but are unlikely to re‑ignite broader inflation pressures,” leaving the Bank room to prioritize a still‑soft growth and labour‑market backdrop.
The C.D. Howe Institute’s shadow council previously urged the Bank to hold 2.25% for a full year and mortgage brokers warned that a flat rate path would keep renewal pain elevated but predictable.
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