Canada’s annual inflation rate rose to 2.4% in March, driven by high gas
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Canada’s annual inflation rate rose to 2.4 per cent in March, Statistics Canada said on Monday, as the cost of oil sent fuel prices way up.
High prices for energy, especially gas, due to the war in Iran drove inflation higher. Energy prices were 3.9 per cent higher compared to a year ago, and the data agency said March’s 21.2 per cent monthly increase in the price of gasoline was the largest on record.
The impact on inflation would have been higher, Statistics Canada noted, if it weren’t being compared to prices from March 2025 that still included the consumer carbon tax, which was dropped in April of last year.
Higher fuel costs also impacted the cost of transportation — up 3.7 per cent year over year in March — and helped drive overall inflation higher.
Prices for food at stores rose 4.4 per cent on an annual basis, up from 4.1 per cent last month. In particular, fresh vegetable prices jumped 7.8 per cent year-over-year in March, which Statistics Canada chalked up to recent tough growing conditions for cucumbers, peppers and celery.
Economists widely expected higher gas prices because of the oil crunch in the critical Strait of Hormuz. That’s cut off about a fifth of the world’s oil supply, causing fuel shortages in some places and gas prices to jump worldwide.
“Everyone knew that inflation jumped in March due to higher gasoline prices. The only question remaining was how high?” CIBC economist Andrew Grantham said in a note to investors.
Grantham expects the cost of gas to keep rising and pull inflation up with it next month, but hopes the federal fuel excise tax suspension, which kicks in Monday, could moderate that impact in May.
Without the price of gas, the pace of inflation would have risen to 2.2 per cent, Statistics Canada said.
Douglas Porter, chief economist at the Bank of Montreal, says core inflation — with volatile factors like gasoline stripped out — was actually milder than expected.
Statistics Canada says the annual inflation rate rose to 2.4 per cent in March from 1.8 per cent in February, with gas prices being a major driver. Gas prices alone went up 21.2 per cent in March, which the agency says is the largest increase on record.
“If it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of [Bank of Canada] rate cuts, not hikes. This report reinforces that opinion,” Porter wrote in a note to clients.
The Bank of Canada will be closely watching the March inflation figures ahead of its next interest rate decision on April 29.
The central bank has signalled it will look through the initial inflationary spike tied to the Middle East…
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