| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 1.0% | 1.0% to 1.1% | 0.9% | 0.5% |
| CPI - Y/Y | 2.5% | 2.5% to 2.8% | 2.4% | 1.8% |
| Core CPI - M/M | 0.1% | 0.5% | ||
| Core CPI - Y/Y | 2.3% | 2.1% to 2.4% | 1.9% | 2.0% |
Highlights
Inflationary pressures were not as strong as expected in March, when gasoline prices lifted the monthly inflation rate to 0.9 percent from 0.5 percent in February, and the 12-month rate to 2.4 percent from 1.8 percent. These readings were slightly lower than expectations of 1.0 percent and 2.5 percent, respectively, in an Econoday survey of forecasters.
All-item inflation averaged 2.2 percent in the first quarter, down from 2.3 percent in the previous quarter, but still above the 2.0 percent target.
Excluding gasoline, inflation actually slowed to 2.2 percent from 2.4 percent year-over-year. The supply shock resulting from the Middle East conflict that started at the end of February boosted gasoline prices, which surged 21.2 percent month-to-month, the largest monthly gain on record and the top upward contributor to monthly inflation. Gasoline was up 5.9 percent year-over-year.
Excluding food and energy, core prices edged up 0.1 percent in March and 1.9 percent year-over-year, roughly in line with the 2 percent Bank of Canada target. Forecasters had expected a 2.3 percent 12-month rate.
Food prices increased 0.3 percent on the month and 4.0 percent from a year earlier, and energy was up 13.1 percent and 3.9 percent, respectively. Fuel oil and other fuel prices surged 26.1 percent in the month, while natural gas prices, dependent on North American supply, plunged 18.1 percent, the largest downward contributor to the 12-month CPI change.
The BoC's own core inflation measures were mixed in March, with CPI median unchanged at 2.3 percent and CPI-trim down to 2.2 percent from 2.3 percent in February year-over-year.
At the BoC March meeting, the central bank said it was too early to assess the impact of the Middle East conflict, although it anticipated higher prices in the near term.
The minutes released April 1 said With no indication of whether the Middle East conflict would end quickly or persist for some time, members agreed that it was too early to discern the net impact from the combination of these forces.
The Governing Council also discussed how high energy and fertilizer prices might spill over to the prices of other goods and services, such as air transportation and food.
A temporary GST/HST tax break during the 2025 winter ended February 15, 2025 led to higher monthly prices in March 2025, putting downward pressure on March 12-month inflation. March 2026 was the final month impacted by base effects related to the GST/HST tax holiday, which affected about 10 percent of the basket.
Overall, goods prices were up 1.9 percent in March from February and 2.1 percent from March 2025. Services edged up 0.1 percent on the month and rose 2.5 percent year-over-year.
Household operations, furnishings and equipment was down 0.9 percent on the month, while prices for all other main categories were up from February, including a 4.2 percent increase in transportation. On a 12-month basis, prices were up in seven of eight categories, with clothing and footwear down 0.4 percent.
Rent, up 4.2 percent year-over-year, was the largest upward contributor to the 12-month CPI, followed by gasoline. Shelter was up 1.7 percent from a year earlier despite a 2.1 percent decrease in homeowners' replacement cost.
On a seasonally adjusted basis, prices were up 0.5 percent in March after 0.2 percent in February. Excluding food and energy, the CPI was flat on the month after edging up 0.1 percent in February.
Market Consensus Before Announcement
The shock evident in gasoline prices, which rose a whopping 21 percent in March from February, is expected to show up in CPI with a 1.0 percent monthly rise and a 2.5 percent increase on year in March. That comes after a more routine 0.5 percent and 1.8 percent in February. Core CPI is expected up 2.3 percent on year, not much better than the total, up from 2.0 percent in February.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.