March inflation will be lower thanks to falling gas prices, economists predict

Statistics Canada is set to announce Canada’s annual rate of inflation for March on Tuesday morning, and most analysts are expecting it fell for the fifth straight month.

A consensus of economists surveyed by Bloomberg believe the Consumer Price Index — a broad-based measure of inflation — was 4.3 per cent higher in March than it was a year ago. In February, the annual rate of inflation was at 5.2 per cent, though some items were still seeing inflation well above the “headline” rate; in February, groceries were 10.6 per cent higher than they were a year ago.

While the price of oil and gasoline rose compared to February, it was still down year over year, and that likely pushed the annual rate of inflation down, said Arlene Kish, director of Canadian Economics at S&P Global Market Intelligence.

“Gasoline prices were down nearly 14 per cent year over year, dampening the annual inflation rate,” Kish wrote in a research note. Kish estimates inflation fell to 4.4 per cent in March.

While that’s lower than the 8.1 per cent inflation peaked at last June, it’s still well above the Bank of Canada’s target of two per cent.

Last week, the Bank of Canada predicted that the rate of inflation will fall to three per cent by the middle of the year.

Last March, the bank began an aggressive rate-hike campaign in a bid to drive inflation down, pushing its overnight rate to 4.5 per cent from 0.25 per cent.

The theory is that by making it more expensive to borrow money, consumers — and businesses — will spend less, which will drive prices down.

In January, a hike of 25 basis points (a quarter of a percentage point) came with a statement from the Bank that it was pausing hikes — at least temporarily.

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