Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.9 per cent on a year-over-year basis in March, up from a 2.8% increase in February. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.3 per cent in March. The slight uptick in headline CPI was largely due to rising gasoline prices. Excluding energy costs, CPI rose 2.8 per cent year-over-year in March, down from 2.9 per cent in February. Shelter costs remain the major driver of inflation with mortgage interest costs up 25.4 per cent and rent up 8.5 per cent from the same time last year in March. Excluding shelter, consumer prices rose just 1.5 per cent, year over year. In BC, consumer prices rose 2.7 per cent year-over-year, up from 2.6 per cent in February. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.8 and 3.1 per cent per cent year-over-year in March.

Inflation ticked slightly higher as expected in March due to rising gasoline prices, however the big surprise in this morning's data was the continued fall in the Bank of Canada's preferred measures of core inflation. Both CPI median and CPI trim were not only down an a 12-month basis but fell to well under 2 per cent when measured on a 3-month basis and to just over 2 per cent on a 6-month basis. Not only is core inflation falling, but it has become more and more clear that inflation in Canada is almost entirely a shelter driven phenomenon. Excluding the rising costs of rents and mortgages, not only is inflation falling, its negative when measured at a 3 and 6-month horizon. If the Bank of Canada is looking for a case to lower its policy rate in June, this report provides ample evidence in support of that move.

Posted by Adam Chahl on
Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.