Canadian Inflation Moves Up as Expected But Easing Underlying Pressures Boost Hopes of June Rate Cut

Canada’s closely watched core inflation, which includes the more volatile food and energy categories, ticked down in February for the third straight month, pushing up bets for an interest rate cut by the Bank of Canada in June. Excluding gasoline prices, core inflation slowed to 2.8 percent from 2.9 percent in February.

As expected, headline inflation ticked up to 2.9 percent in March, driven by costlier gas prices as supply concerns and voluntary production cuts have pushed global crude prices higher. During the month, the consumer price index rose 0.6 percent, the largest increase since July 2023, but still less than expectations.

Importantly, inflation has stayed under 3 percent since January, in line with the Bank of Canada’s forecast. BoC Governor Tiff Macklem said March data suggested the Canadian economy was continuing to move “in the right direction” and noted the continued downward trend of core inflation. The news prompted an upward jump in projections for a June rate cut from 44 percent to 55 percent. 

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