Canada's annual inflation rate eased to 4.3 percent in March, the smallest increase since August 2021.
The decline in the Consumer Price Index (CPI) was driven by base year effects and the slowdown in gas prices. Statistics Canada reported that Canadians paid more in mortgage interest costs last month, but that cost increase was offset by an annual drop in gas prices. On a monthly basis, Statistics Canada said inflation rose 0.5 per cent, or a seasonally adjusted 0.1 per cent.
The decline in inflation is in line with economists' expectations. Economists expect inflation to register at 4.3 percent in March, according to Bloomberg.
Although Canada's inflation rate has been on a steady decline since peaking last summer, grocery prices remain high. The cost of food purchased from stores rose 9.7 per cent in March, a slowdown from the 10.6 per cent increase seen in February, with Statistics Canada citing slower growth in the price of fresh fruits and vegetables. The price of fresh fruit rose 7.1 percent (down from 10.5 percent in February) while the price of fresh vegetables rose 10.8 percent (down from 13.4 percent in February).
Gas prices fell for a second month in a row in March, down 13.8 percent from last year, marking the biggest decline since July 2020. The decline was largely driven by base-year effects, when prices spiked in March 2022 amid supply uncertainty following Russia's incursion into Ukraine.
Mortgage interest costs rose 26.4 percent in March, up from 23.9 percent in February, the largest increase on record.
According to Royce Mendes, managing director and chief macro strategist of Desjardins, "Canadian households should not expect a widespread decline in prices, there are increasing signs that the pace of price growth is slowing down."
The Bank of Canada has said it expects inflation to fall to around 3 per cent by mid-2023, with a return to the 2 per cent target occurring by the end of 2024.
The Bank chose to keep its key interest rate steady at 4.5 percent last week, but stressed that getting inflation back to 2 percent was a little difficult.
