Canada's March CPI report reveals slowed inflation

Investing.com -- The Consumer Price Index (CPI) in Canada increased by 2.3% year over year in March 2025, a slight dip from the 2.6% rise in February, and lower than analyst expectations of 2.7%, as per Statistics Canada's recent report. Lower prices for travel tours and gasoline were key factors in the year-over-year slowdown in the all-items CPI. However, the CPI saw a 2.5% increase when excluding gasoline, a slight decrease from February's 2.6% rise.

The end of the temporary Goods and Services Tax (GST)/Harmonized Sales Tax (HST) break on February 15, 2025, put upward pressure on prices for eligible products in March. On a monthly basis, the CPI rose 0.3% in March, but was unchanged when seasonally adjusted.

Travel tours and airfares experienced a decrease in prices. Travel tours saw a year-over-year decline of 4.7% in March, following a significant rise in February. On a month-over-month basis, travel tour prices fell 8.0% in March. Air transportation prices also fell 12.0% year over year in March, following a 4.4% decline in February. This decrease in prices coincided with a drop in Canadian air travel to the United States.

Gasoline prices also fell year over year by 1.6% in March, following a 5.1% increase in February. This decline resulted from lower crude oil prices due to concerns over slowing global oil demand and economic growth, and the threat of tariffs. The Organization of the Petroleum Exporting Countries and its partners (OPEC+) also confirmed an increase to production.

Cellular services saw a year-over-year price decrease of 8.8% in March, following a 3.7% decline in February, due to industry-wide promotions leading to lower prices for cellular phone plans.

March marked the first full month since the end of the federal tax break in mid-February. The re-application of GST/HST to affected products resulted in upward price pressure. Food prices from restaurants rose 3.2% year over year in March, moderating the slowdown in headline inflation.

The impact of tariffs on the economy, including inflation, continues to be monitored by Statistics Canada. The effects of tariffs are embedded in the final prices collected, with no special adjustments required to the Consumer Price Index.

On a regional level, prices rose at a slower pace in eight provinces in March compared with February. Nova Scotia was the only province with accelerating price growth (+2.3%), primarily due to higher prices for shelter (+4.8%).

In response, CBIC's Katherine Judge commented that the results are consistent with an expected Bank of Canada rate cut tomorrow, saying, "The easing in price pressures is consistent with the Bank of Canada cutting interest rates by 25bps at tomorrow's meeting, with the downside risks to growth from the trade war outweighing any upside to inflation from tariffs in our view."