The Consumer Price Index (CPI) increased 2.4% year over year in March, up from an increase of 1.8% in February, according to a report released Monday by Statistics Canada.
Driving faster price growth in headline inflation were higher prices for energy, especially gasoline, due to the conflict in the Middle East. Excluding gasoline, the CPI rose at a slower pace year over year in March (+2.2%) compared with February (+2.4%), said the federal agency.
There remained lingering base-year effects from the GST/HST break which ran from December 2024 to February 2025, resulting in downward pressure on headline inflation in March 2026, it said.
The CPI was up 0.9% month over month in March. On a seasonally adjusted monthly basis, the CPI increased 0.5%.
“Energy prices rose 3.9% on a year-over-year basis in March, after decreasing 9.3% in February. On a monthly basis, energy prices rose 13.1% in March, said the report.
“Higher prices for gasoline were the primary driver of the year-over-year acceleration in the CPI, as consumers paid 5.9% more for gasoline in March than they did in the same month the previous year. Prices surged 21.2% on a monthly basis, the largest price increase for gasoline on record, due to the supply shock resulting from the conflict in the Middle East. However, this monthly effect was muted on a year-over-year basis due to the comparison with prices from March 2025, which included the since-removed consumer carbon levy. The removal of the consumer carbon levy will no longer impact the 12-month movement as of April 2026, and this will be reflected in next month’s CPI release.”
Statistics Canada said prices for food purchased from stores rose 4.4% on a yearly basis in March, after increasing 4.1% in February.
On a year-over-year basis, prices for fresh vegetables increased 7.8% in March, the largest increase since August 2023 (+8.7%), after rising 0.5% in February. Cucumbers, peppers and celery all had notable price growth in March, due in part to tighter supplies related to adverse growing conditions in producing countries, it said.
“Prices for food purchased from restaurants continued to grow year over year at a slower pace. After increasing 7.8% in February, prices rose 3.2% in March due to a base-year effect,” said Statistics Canada.
“Slower growth for alcoholic beverages purchased from stores (+2.0%) and toys, games (excluding video games) and hobby supplies (+1.5%) also contributed to the downward pressure in March.”
Andrew Grantham, Senior Economist, CIBC Capital Markets, said: “Looking forward, a further rise in gasoline prices will see headline inflation jump to around 3% next month, before hopefully easing back slightly in May, partly due to the temporary suspension of the federal fuel excise tax (worth about -0.2%-pts to headline inflation for May). Pass-through from higher energy prices into core measures of inflation may become more evident closer to the summer months, particularly as higher air fares are picked up more fully, but slack within the Canadian economy should prevent those measures from reaccelerating too much, enabling the Bank of Canada to remain on the sidelines through 2026.”
Doug Porter, Chief Economist, BMO Capital Markets, said: “It could have been worse. Much as other major economies posted a significant pop in headline inflation, the record rise in gasoline prices lifted Canada’s inflation rate significantly last month. However, the picture for underlying inflation was a bit better than expected, and continues the recent pattern of steadily moderating core inflation trends. Our considered view is that if it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of BoC rate cuts, not hikes. This report reinforces that opinion.”
Leslie Preston, Senior Economist, TD, said: “As expected, higher oil prices boosted Canadian inflation in March. Oil prices have fallen in recent days but remain nearly 40% higher than a year ago. That means energy prices are likely to keep headline inflation elevated for some time. April’s inflation reading is likely to head much higher as the dampening effect of the removal of the consumer carbon levy falls out of the year-on-year inflation calculation.
“Given a generally soft economic backdrop in Canada, we expect the effect on core prices should be more modest. Core inflation is expected to stay reasonably close to the 2% target on a year-on-year basis this year. The Bank of Canada is widely expected to leave its key policy rate unchanged at 2.25% at next week’s announcement. We will be listening closely for the Bank’s assessment of the impact of the spike in oil prices on Canada’s economy.”
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