Canada’s yearly inflation rate surged to 2.4 percent in March, stated Statistics Canada on Monday, driven by soaring fuel prices, particularly due to the increased cost of oil. The prices of energy, notably gas, spiked due to the turmoil in Iran, pushing inflation upwards. Energy costs were 3.9 percent higher than a year ago, with gasoline prices in March experiencing a record-breaking 21.2 percent monthly increase.
Statistics Canada highlighted that inflation would have been even higher if compared to prices from March 2025, which included the consumer carbon tax that was eliminated in April of the previous year. The escalating fuel expenses also impacted transportation costs, rising 3.7 percent year-over-year in March and contributing to the overall inflation increase.
In addition, food prices at stores climbed 4.4 percent annually, up from 4.1 percent the previous month. Particularly, fresh vegetable prices surged by 7.8 percent 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 crisis in the critical Strait of Hormuz. This disruption, which has disrupted about a fifth of the global oil supply, led to fuel shortages in some regions and a global increase in gas prices.
CIBC economist Andrew Grantham mentioned in a note to investors that the inflation spike in March was expected, primarily driven by higher gasoline prices. Grantham predicts that gas costs will continue to rise, impacting inflation in the upcoming month, but he hopes that the suspension of the federal fuel excise tax, effective from Monday, could alleviate this impact in May.
Excluding gas prices, Statistics Canada mentioned that inflation would have risen to 2.2 percent. Chief economist Douglas Porter from the Bank of Montreal noted that core inflation, excluding volatile factors like gasoline, was relatively lower than anticipated.
Porter expressed that had it not been for the Iran conflict, the focus would have been on the likelihood of Bank of Canada rate cuts rather than hikes. The Bank of Canada is closely monitoring the March inflation data in preparation for its next interest rate decision on April 29. While the initial inflation spike linked to the Middle East conflict will be overlooked, the central bank aims to prevent higher gas prices from translating into prolonged inflationary pressures.
