Canada's Underlying Inflation Looks Relatively "Tame" Again Despite A Sharp Rise in Gasoline Prices in March, Says Desjardins

11:06 AM EDT, 04/20/2026 (MT Newswires) -- With consumers facing a 13% increase in energy costs in March, Canada's consumer price index rose 0.9% month over month, said Desjardins after Monday's CPI data.

However, that was slightly below expectations as CPI excluding food and energy posted a surprisingly weak flat reading, noted the bank. In addition, the share of CPI categories with prices rising faster than a 3% per year declined, while the share rising slower than 1% rose.

While the Bank of Canada's preferred measures of core inflation accelerated to a monthly pace of 0.2% month over month from 0.1% previously, that was the result of a combination of higher energy prices and a spike in the volatile rent reading.

Notwithstanding the monthly pickup, the average three-month annualized rate of those metrics stood at just 1.7% in March, which was similar to the bank's tracking of three-month annualized core-services excluding shelter inflation.

Adding to the evidence that underlying price pressures remain tame, the average annual rate of the bias-adjusted measure of core-median and trimmed mean inflation measures of Desjardins also looked "soft" at 1.8% versus an unadjusted average of 2.3%.

The bank pointed out it expected the global increase in energy prices to have had only a limited impact on underlying inflation metrics. Even if the conflict in the Middle East continues, Desjardins view this as a relative price shock that will have only minor spillovers to core inflation metrics.

As a result, the BoC should be able to remain on the sidelines for the rest of this year in an effort to spur a revival of economic activity. In response to the data, market participants have further reduced bets on BoC rate hikes, with less than one 25 basis point increase now priced for this year.

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