Preview: Due April 20 - Canada March CPI - Higher on energy but BoC core rates seen close to stable
We expect March Canadian CPI to bounce to 2.8% yr/yr from 1.8% in February, reaching its highest since May 2024. We expect ex food and energy CPI to also pick up, to 2.3% yr/yr from 2.0%, but we expect the Bank of Canada’s three core rates to be close to stable, still slightly above the 2.0% target.
Gasoline prices surged around 25% on the month, similar to gains seen in the US, and will lead the rise in CPI. On the month we expect a 1.0% increase seasonally adjusted and a 1.3% increase before seasonal adjustment. Ex food and energy we expect a 0.3% rise seasonally adjusted and a 0.5% increase before seasonal adjustment. Before rounding we expect yr/yr growth of 2.81% overall and 2.28% ex food and energy.
In the last ten months seasonally adjusted ex food and energy CPI has seen four gains of 0.1%, three of 0.2% and three of 0.3%, with each of the 0.3% gains being only marginally above 0.25% and each of the 0.2% gains being marginally below 0.2% before rounding. While the feed through from energy prices to core CPI is likely to be marginal in March, even a small impact may be enough to move the seasonally adjusted increase to 0.3% before rounding.
Air fares are one component to watch for upside risk in energy feed-through, while shelter may correct from two straight 0.1% seasonally adjusted declines. Telephone services and purchases of digital media also saw below trend outcomes in February. Still, despite upside risks in a few components, the underlying picture excluding food and energy is likely to remain subdued.
The yr/yr ex food and energy rate is likely to bounce given a weak month a year agio, when air fares, travel tours and telephone services, components which have some upside risk this month, were soft. However, these outlying components are unlikely to have much impact on the Bank of Canada’s core rates. We expect CPI-Common to be unchanged at 2.4% yr/yr, with CPI-Median unchanged at 2.3% (even before rounding). We expect CPI-Trim to remain very close to 2.25% yr/yr, but before rounding we expect slippage to 2.2% from 2.3%.