Canada March Inflation Rises: Possible Interest Rate Cut in June

March 2024 saw significant changes in Canada’s inflation picture that could lead to changes in monetary policy. According to the latest report from Statistics Canada, the annual Consumer Price Index (CPI) in March increased to 2.9%, driven by increases in shelter costs and gas prices. Despite this headline rise, core inflation, which excludes volatile items like food and energy, continued to ease, backing market expectations for a possible interest rate cut by the Bank of Canada (BoC) in June.

The main reason why the yearly inflation rate went up to 2.9% was higher gas prices, which were caused by higher gasoline prices, influenced by global crude supply concerns and production cuts. If you take out gasoline, the CPI showed a slower rise of 2.8%, continuing the trend of going down from February’s 2.9%. Monthly, the CPI went up by 0.6%, which was a little less than the 0.7% rise that was expected. Inflation news has been closely monitored by economists and market analysts, especially as Canada inflation news today indicates potential shifts in the financial horizon.

Market Reactions and Predictions

After seeing the March inflation numbers, the financial markets bet more on a rate cut in June. The chance of a June interest rate cut went up from 44% before the report came out to about 55% after it did. The Canadian dollar also saw a decline, hitting a five-month low against the U.S. dollar.

With the BoC scheduled to meet on June 5th, the focus will be on whether these inflation trends continue. Governor Tiff Macklem said that the central bank is keeping a close eye on inflation figures to make sure the downturn will last before changing interest rates. With signs that inflation is going down and economic data pointing to slower growth, monetary policy could be eased in the coming months.

Service and Shelter Costs

Despite the positive signs of core inflation, service prices continue to pose challenges. The Conference Board of Canada’s senior economist, Kiefer Van Mulligen, identified the persistence of raised service price growth as a significant concern. “Service prices grew by 4.2 percent in February, whereas goods prices rose by only 1.2 percent year over year,” Van Mulligen explained. He attributed this stubbornness largely to shelter costs, noting that mortgage interest costs, though slightly cooling, remain high with a 26.3 percent year-over-year increase in February.

Economists’ Perspectives

In an interview with BNN Bloomberg, Dylan Smith, a senior economist at Rosenberg Research, emphasized the central bank’s likely rotation towards cutting interest rates, given the easing inflation pressures. “Last month, we had headline inflation dipping below three percent for the first time — and it’s really good to see that trend continuing,” Smith noted.

Similarly, Tu Nguyen, an economist with RSM Canada, noted that the easing in grocery inflation — falling below the headline number for the first time since 2021 — is a positive development for Canadian households. “When consumers go to grocery stores these days, they can see prices rise more slowly. Deals and discounts are becoming more common once again,” Nguyen said in a statement to BNN Bloomberg. He stressed the importance of looking beyond volatile items like gasoline to understand the underlying price pressures, which are showing signs of easing across the board. For continuous updates on inflation trends and their impacts, follow the latest inflation news.

Keeping up with inflation news today and understanding the nuances of Canada’s inflation can help investors and consumers make more informed decisions. For more detailed insights on how these inflation trends could impact investment decisions, visit CanAm Bullion.