MNI: Canada's 4.3% March Inflation Is Slowest Since Aug 2021

Canada's March inflation was the slowest since August 2021 on gasoline and a weak housing market, fading to 4.3% from 5.2% as investors expected and backing the central bank's argument for holding interest rates. 

Statistics Canada also said Tuesday that two core measures preferred by the Bank of Canada also slowed. The median index dimmed to 4.6% from 4.9% and the trim measure to 4.4% from 4.8%. 

The figures should provide comfort to Governor Tiff Macklem who held a 4.5% policy lending rate last Wednesday and predicted inflation will slow to 3% by midyear. Macklem also said that while his eight prior hikes should bring inflation to the 2% target next year he's prepared to hike again if inflation gets stuck at an elevated pace.

Consumer prices have now slowed for a fifth straight month and are down from June’s four-decade high of 8.1%. The Bank sets rates to keep inflation in the middle of a 1%-3% band and return to target within two years, and price gains have already topped 2% since March of 2021.

The March report showed gasoline prices tumbled 14% from a year earlier, the most since July 2020. Homeowner replacement costs slowed to 1.7% from 3.3%, though mortgage interest costs kept setting new records with a 26% jump. 

Gas prices could rise again in coming months following the recent OPEC+ production curbs, though investors are betting on the Bank of Canada cutting later this year following the collapse of Silicon Valley Bank. 

The BOC last week said upside risks are more concerning and several things could frustrate efforts to get prices in line including higher wage demands, stubborn services prices or shifting inflation expectations.

Most firms see inflation running much faster than 2% until at least 2025, the Bank reported April 3, and a separate survey showed households saw 6% inflation a year from now. Grocery prices that have been grabbing headlines remain firm, up 9.7% versus 10.6% in February. 

Consumer prices rose 0.5% on a monthly basis, matching economist forecasts, driven by holiday packages over spring break. Seasonally adjusted prices rose just 0.1%.