March sees Canadian inflation rise to 3%, but economists believe a Bank of Canada rate cut remains likely
Canadian inflation is likely to have picked up again in March, although economists believe it will not significantly alter the Bank of Canada's current trajectory.
The Financial Post reports that markets anticipate inflation to have risen to three percent last month, up from February's unexpected dip to 2.8 percent year over year. This uptick comes amid reports of increasing inflation rates in the United States during March.
Economists at the Royal Bank of Canada, including Nathan Janzen and Abbey Xu, predict that the March Consumer Price Index (CPI) in Canada will reach three percent, driven mainly by rising gasoline prices that have pushed energy costs higher than last year's levels.
This development comes as the Bank of Canada awaits more evidence of sustained price trends before considering interest rate cuts.
CIBC Capital Markets' economist Andrew Grantham also noted a slight increase in March inflation to 2.9 percent, suggesting that while inflation may show some resurgence, it likely will not negate the progress made earlier in the year.
This assessment keeps the possibility of a June interest rate cut by the Bank of Canada on the table, with core inflation measures such as CPI-trim and CPI median expected to continue their downward trend.
Meanwhile, analysts at National Bank of Canada attribute the anticipated rise in the headline index to the spike in March gasoline prices, projecting a 0.7 percent increase before seasonal adjustment.
Scotiabank's economist Derek Holt also forecasts a three percent year-over-year increase in headline CPI, emphasizing the need for a comprehensive assessment beyond a few months of data before any policy easing.
Holt criticized the Bank of Canada's heightened sensitivity to recent data fluctuations, suggesting that the central bank's communications and forecasts indicate no urgency to reduce rates.
This perspective reflects a broader consensus among economists that, while inflation is slightly on the rise, the Bank of Canada is likely to proceed cautiously with any adjustments to interest rates.
