Canada’s annual inflation rate surged to 2.4% in March, driven by soaring oil prices, as reported by Statistics Canada on Monday. The spike in energy costs, particularly gas, attributed to the conflict in Iran, propelled inflation upwards. Energy prices escalated by 3.9% compared to the previous year, with March witnessing a record-breaking 21.2% surge in gasoline prices.
Statistics Canada highlighted that inflation would have been even higher if compared to March 2025 prices, which still included the consumer carbon tax abolished in April last year. The transportation sector felt the impact of increased fuel costs, with prices rising by 3.7% year-over-year in March.
Food prices at stores climbed by 4.4% annually, up from 4.1% the previous month. Notably, fresh vegetable prices surged by 7.8% year-over-year in March, attributed to challenging growing conditions for cucumbers, peppers, and celery.
Economists had anticipated the surge in gas prices due to the oil supply disruption in the Strait of Hormuz. This disruption, cutting a fifth of the global oil supply, led to fuel shortages and price hikes worldwide.
CIBC economist Andrew Grantham predicted further gas price increases influencing inflation in the upcoming month. However, he hoped that the suspension of the federal fuel excise tax, effective Monday, would mitigate this impact in May. Excluding gas prices, inflation would have risen to 2.2%, according to Statistics Canada.
Chief economist at the Bank of Montreal, Douglas Porter, noted that core inflation, excluding volatile factors like gasoline, was less severe than expected.
The Bank of Canada is closely monitoring the March inflation data ahead of its interest rate decision on April 29. While acknowledging the initial inflationary surge linked to the Middle East conflict, the central bank aims to prevent elevated gas prices from translating into prolonged inflation.
