• As expected, all items CPI rose 0.7% month-over-month in March as gasoline prices jumped nearly 12%
  • Energy was also the driving force behind year-over-year inflation rising to 1.9% from 1.5% in February
  • Seasonal monthly increases in travel services and clothing prices had little impact on the year-over-year rate
  • The BoC’s core inflation measures ticked back up to 2.0% year-over-year in March, remaining in the tight range seen since the start of 2018

As expected, headline inflation bounced back to nearly 2% in March after starting the year closer to 1.5%. That’s largely an energy story, though, as the decline in gasoline prices late last year (driven by lower global oil prices) continues to be reversed. Rising rent and mortgage interest costs are also serving to boost headline inflation. Otherwise, core inflation remains well behaved, with the BoC’s preferred measures averaging 1.9-2.0% for more than a year now. Today’s CPI report isn’t the only evidence of limited price pressure. The BoC’s Q1 Business Outlook Survey released earlier this week showed little evidence of input or output price inflation, while firms’ inflation expectations moderated. We think Monday’s BOS, which more broadly showed deteriorating business sentiment early this year, sets up for a dovish tone from the Bank of Canada next Wednesday. Today’s CPI report does little to change that.


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