TD Sees Canada's CPI Rising to Almost 3% Y/Y in Next Months But Core CPI to Stay Close to 2% Target

12:25 PM EDT, 03/16/2026 (MT Newswires) -- Canada's inflation cooled in February, but that is backward-looking now that prices at the pump have skyrocketed in the wake of the United States/Israeli war with Iran, said TD.

The bank expects higher energy costs will lift the headline consumer price index close to 3% year over year in the months ahead, but the effect on the Bank of Canada's core measures should be more modest.

Core inflation is expected to stay reasonably close to the 2% target on a year-on-year basis this year, stated TD.

Headline CPI inflation cooled in February to 1.8% year over year on Monday, slightly below consensus expectations. The GST/HST break ended partway through February 2025, which led to large price increases in that month, but put downward pressure on the year-over-year price change in February 2026.

The BoC has focused on broader "underlying inflation" recently, but the official core inflation metrics (median and trim) both cooled further in February to 2.3% year over year. Zeroing in on trends over the past three months, trim and median inflation continued to run well below the BoC's 2% target.

The BoC's interest rate decision is coming up on Wednesday, and Canada's central bank is universally expected to remain on pause, stated TD. The bank pointed out it will be listening closely to the BoC's assessment of the impact of the oil shock on Canada's economy.

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