Canada's inflation rate slows to 4.3% in March

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Canada's annual inflation rate eased in March to 4.3%, its slowest pace in 19 months but still more than double the Bank of Canada's 2% target, data showed on Tuesday.

The headline inflation figure matched expectations as a decline in energy prices helped offset a record spike in mortgage costs, Statistics Canada data showed on Tuesday.

"Inflation hasn't been running this slow since 2021, but that's still not enough to satisfy Canadian central bankers who are laser-focused on returning price growth to its 2% target," said Royce Mendes, head of macro strategy at Desjardins Group.

Month-over-month, the consumer price index was up 0.5%, also in line with forecasts.

Last week, the Bank of Canada held its benchmark interest rate at 4.50%, as expected, but struck a hawkish tone, playing down market expectations for a rate cut this year as the risk of a recession diminished.

Last week, the bank also projected that headline inflation would cool to about 3% by mid-2023, but the decline toward the its 2% target would be more gradual than previously forecast due to stickier services prices.

Services prices rose 5.1% annually in March, while the price of goods increased by 3.6%, Statscan data showed. The March inflation reading benefited from a comparison to last year's strong price increase.

The average of two of the BOC's core measures of underlying inflation, CPI-median and CPI-trim, came in at 4.5% compared with 4.9% in February.

"I would characterize this as modestly good news," said Doug Porter, chief economist at BMO Capital Markets. "We did see the expected come down in all the core measures. Things are mostly unfolding as expected.""

Price rises of store-bought food slowed to 9.7% in March, falling below 10% for the first time in eight months. Excluding food and energy, prices rose 4.5% compared with a rise of 4.8% in February.

Energy prices declined 6.9% annually in March while mortgage interest costs surged 26.4% annually, the largest yearly increase on record, as Canadians continued to renew and initiate mortgages at higher interest rates, Statscan said.

Reuters