Person paying for goods using their phone

CPI up 6.7 per cent in March; Bank of Canada’s gloves come off in April

  • In March, the Consumer Price Index (CPI) rose by 6.7 per cent (y/y).
  • Gasoline prices rose by 11.8 per cent (m/m) and were 39.8 per cent higher than a year ago. Year-over-year food prices also increased, both in stores (+8.7 per cent) and in restaurants (+5.4 per cent).
  • Excluding food and energy, the CPI climbed by 4.6 per cent in March. Year-over-year and month-over-month prices were higher in all eight major CPI components. Rising prices in many shelter and transportation subcategories remain key contributors to overall CPI growth.
  • On a seasonally adjusted monthly basis, the CPI went up 0.9 per cent in March, which was higher than the increase of 0.8 per cent in February.
  • The average of the Bank of Canada’s three core inflation measures bumped up to 3.8 per cent in March from 3.5 per cent in February. CPI-trim increased to 4.7 per cent, CPI-median grew to 3.8 per cent, and CPI-common moved up to 2.8 per cent.

Key Insights:

  • Russia’s invasion of Ukraine is taking an incalculable human toll. But the invasion gave a very calculable boost to already-rising energy and food prices in March. Across many categories of goods, excess demand and limited supply are translating into rapid price growth. But the story isn’t all about goods. In Canada, many restrictions were lifted in March, and as service-producing businesses began to ramp up their operations, service prices increased by 4.3 per cent (y/y).
  • In April, the Bank of Canada switched into high gear and raised its overnight rate by 0.5 per cent (it now sits at 1.0 per cent). The BoC’s rapid moves will reel in domestic sources of price growth and may convince Canadian consumers and businesses that the situation will soon be under control. But broadening price increases and greater uncertainty over when widespread inflationary pressures will start to ease (let alone return to the Bank of Canada’s inflation target) have upset short-term inflation expectations.
  • Global influences pushing Canadian consumer prices higher may take longer to rein in. Repairing and reorganizing trade linkages and securing stable supplies of raw, intermediate, and final goods will take time. Surging COVID-19 cases in China are only prolonging these problems.
  • While some measures included in the recent federal budget are aimed at making life more affordable for Canadians, new spending in the plan may exacerbate inflationary pressures. With the economy already at full capacity and constrained by labour shortages, stimulative manoeuvres by the federal government may be at odds with the Bank of Canada’s aim to rein in price growth.
Russian Invasion of Ukraine: Access the latest insights