Canada’s March inflation report confirmed headline CPI leaping to 2.4% y/y — its quickest tempo in three months — because the Iran struggle drove gasoline costs to a document month-to-month surge.
However with the studying coming in beneath the two.6% consensus and the Financial institution of Canada’s (BOC) most well-liked core measures holding regular or easing, merchants learn the information as much less alarming than feared, sending the Canadian greenback broadly greater.
Statistics Canada reported that the patron worth index rose 0.9% month-over-month in March, up from 1.8% y/y in February, with a document 21.2% month-to-month leap in gasoline costs accounting for the majority of the acceleration. The Iran struggle has throttled oil shipments by way of the Strait of Hormuz since late February, wiping out roughly a fifth of world provide and sending gas prices hovering worldwide.
Critically for the BOC, underlying worth pressures confirmed no significant spillover from the power shock. CPI-median held regular at 2.3% y/y, whereas CPI-trim eased a tick to 2.2% — a five-year low. Core CPI excluding meals and power slipped to 1.9% from 2.0%, and three-month annualized core measures averaged simply 1.4%, reflecting an financial system with appreciable slack absorbing the commodity shock.
Key Takeaways
- Headline CPI rose to 2.4% y/y in March, up from 1.8% in February, however got here in beneath the two.6% consensus forecast
- Core CPI excluding meals and power slowed to 1.9% y/y from 2.0%; three-month annualized core measures averaged simply 1.4%
- Month-to-month CPI gained 0.9%, the most important month-to-month enhance in over a yr; the month-to-month print additionally missed the 1.1% forecast
- The BOC’s most well-liked core measures held agency: CPI-median was unchanged at 2.3% y/y; CPI-trim eased to 2.2%, a five-year low
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Gasoline costs surged a document 21.2% month-over-month — the most important month-to-month enhance in Statistics Canada’s information — and rose 5.9% y/y (the y/y determine was partly muted by the patron carbon levy nonetheless in costs from March 2025)
- Power costs rose 3.9% y/y and 13.1% m/m total; pure fuel fell 18.1% m/m, insulated from international disruptions by its North American provide base
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Meals bought from shops rose 4.4% y/y (up from 4.1%), with contemporary greens leaping 7.8% — the most important enhance since August 2023 — as a consequence of hostile rising circumstances for cucumbers, peppers, and celery
- Lingering base-year results from the December 2024–February 2025 GST/HST break dampened restaurant meals costs, which slowed sharply to +3.2% y/y from +7.8% in February
- Lease ticked as much as 4.2% y/y from 3.9%; shelter rose 1.7% y/y total
Hyperlink to official Statistics Canada Client Value Index (March 2026)
The March knowledge supplied the BOC’s first take a look at how the Iran struggle is filtering by way of to Canadian costs forward of its April 29 charge choice. The image was one in all a supply-side power shock contained largely on the pump, with the broader financial system’s slack appearing as a buffer in opposition to pass-through to underlying costs.
Market Reactions
Canadian Greenback vs. Main Currencies: 5-min
Overlay of CAD vs. Main Currencies – Chart Sooner with Tradingview
Analysts broadly characterised the report as a relative worth shock with solely minor spillovers to core inflation, supporting the case for the BOC to stay on maintain. The broader view was that with out the battle, the dialog would at present be about charge cuts relatively than hikes. Markets have been pricing lower than one 25-basis-point hike for all of 2026 as of Monday, down sharply from bets for 2 hikes when the struggle first broke out in late February.
The Canadian greenback, which was buying and selling close to its intraday lows in opposition to some main counterparts, initially slipped on the lower-than-expected headline figures.
Nonetheless, the sticky excessive inflation prints, a restoration in crude oil costs, and the relative weak point of the U.S. greenback possible improved the Loonie’s demand an hour later. Demand for the Loonie constructed steadily by way of the session, lifting it broadly greater, with the clearest energy displaying up in opposition to the Dollar and the euro.
By the point London markets wrapped up, it was clear merchants had taken consolation in the concept the power shock was not spilling into broader inflation, permitting CAD to carry onto its beneficial properties and shut the day stronger throughout the board, with solely the Swiss franc managing to maintain tempo.
Promoted: CAD didn’t transfer on the headline; it moved on what was beneath.
Canada’s CPI spiked on power, however softer core inflation flipped the narrative and despatched the Loonie greater after the preliminary response. In markets like this, lacking the true story by just a few seconds can price you the transfer.
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