Statistics Canada reported on Canada’s consumer price data yesterday. As expected, the report showed that inflationary pressures in Canada did pick up in March, mainly due to a sharp rise in energy costs. The conflict in the Middle East closed off the Strait of Hormuz, a critical waterway in the global distribution of oil from the region. The closure has pushed up oil prices, accelerating inflationary pressures in countries around the world, including Canada. With the conflict expected to extend into July, there’s the potential for Canada’s inflation rate to move even higher in the months to come, which could weigh on the Bank of Canada’s (BoC) outlook.

• Canada’s annual inflation rate was 2.4% in March, up from 1.8% in February. Despite the increase, it came in below economists’ expectations, based on a Bloomberg survey. This is Canada’s highest rate of inflation in four months.
• March’s increase was mainly due to a rise in energy costs, which rose by 3.9% compared to a decline of 9.3% in February.
• On a monthly basis, consumer prices increased by 0.9% in March, driven by a 21.2% increase in gasoline prices. This marked the biggest monthly jump in consumer prices since February 2025.
• Annual core inflationary pressures held largely steady in March. The median annual core inflation rate was unchanged at 2.3%, while the trim annual core inflation rate edged lower to 2.2% from 2.3%.
• Meanwhile, a look at consumer confidence from Bloomberg Nanos showed a slight upturn in confidence; however, it remains at ultra-low levels on concerns about prices and the economy.

Attention will now turn to the BoC, which makes its next interest rate decision on April 29. The BoC is currently expected to hold its benchmark overnight interest rate steady at 2.25%. Canada’s central bank could look past the immediate effect on inflation from rising energy costs, and instead focus on core pressures, as inflation still remains close to the BoC’s 2% target.

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