In March, the annual inflation rate increased due to the increase in gasoline prices

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OTTAWA – Higher gasoline prices helped annual inflation rise in March, but core inflation cooled throughout the month, raising the possibility of the Bank of Canada cutting interest rates in June.

Statistics Canada reported Tuesday that the March consumer price index rose 2.9% from a year earlier, up from February's 2.8% increase.

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This increase was due to a 4.5 percent increase in gasoline prices compared to last year, which contributed to the increase in world oil prices.

Excluding gasoline, Statistics Canada said the headline annual inflation rate in March was 2.8 per cent, up from 2.9 per cent in February. The Bank of Canada's three main measures of inflation in March were down from February.

Leslie Preston, managing director and senior economist at TD Bank, said she expects the Bank of Canada to cut interest rates in July, but added that the latest data makes it more likely that it will move in June.

“We are seeing a very encouraging cooling in core inflationary pressures,” Preston said.

“So we've seen three good months now, but you know, the governor wants to see a little bit more, even if it's a tough call for a month or two.”

Preston said April's inflation figures will be important, but he will also be watching what the federal budget holds, as well as the next jobs report.

The central bank kept its key interest rate on hold at five percent last week, but said it was “within the realm of possibility” that it could cut rates at its next statement, scheduled for June.

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The Bank of Canada said it is looking for evidence that the recent decline in inflation is sustainable.

Bank of Canada Governor Tiff Macklem said last week: “We're seeing what we need to see, but we need to see it over a long period of time to be sure that progress toward price stability is sustainable.”

Preston noted that inflation in the US has slowed dramatically, but is now rising again.

“You know, these things don't necessarily move in a straight line. It can be bumpy. The question is, you know, how many bearish months do you have to see before the Bank of Canada is confident that they're going to cut rates, and that's where the uncertainty lies,” he said.

Olivia Cross, North America economist at Capital Economics, said the March reading was in line with a trend of lower core inflation seen so far this year.

“The bank will likely want to see more of the same in the April CPI data, which will be released before the bank's next meeting, although a slight increase in average monthly income is unlikely to prevent a June cut,” Cross wrote. in the report.

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“There are still some risks to this view, especially as tensions in the Middle East escalate, which could lead to much higher oil prices.” Gasoline prices were one of the strongest contributors to March's core CPI, while oil prices continued to rise in early April.”

Statistics Canada said home prices continued to drive overall inflation, as they rose 6.5 percent from a year ago.

In March, mortgage interest expenses increased by 25.4 percent compared to a year ago, and rental prices increased by 8.5 percent.

Food prices increased by 3.0 percent compared to a year ago, and clothing and footwear prices decreased by 2.7 percent. Prices of household operations, furniture and equipment decreased by 2.3 percent.

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List of March inflation rates for Canadian provinces (previous month in parentheses):

— Newfoundland and Labrador: 3.1 percent (2.0)

— Prince Edward Island: 2.6 percent (1.5)

— Nova Scotia: 3.3 percent (2.8)

– New Brunswick: 2.6 percent (2.1)

— Quebec: 3.6 percent (3.3)

— Ontario: 2.6 percent (2.4)

— Manitoba: 0.8 percent (0.9)

— Saskatchewan: 1.5 percent (1.7)

— Alberta: 3.5 percent (4.2)

— British Columbia: 2.7 percent (2.6)

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