Inflation in Canada fell to 2.3 per cent in March, Statistics Canada said Tuesday, surprising analysts as the country’s economic outlook remained clouded by U.S. tariffs.
Most economists expected average prices to rise slightly or remain unchanged from February, when they rose 2.6 per cent after hovering below 2.0 per cent the previous six months.
“Some volatile categories were at play, with travel tours plummeting by 8 per cent after a surge in the prior month,” commented CIBC analyst Katherine Judge.
The easing prices, she said, will add pressure on the Bank of Canada to cut its key lending rate when its governors meet on Wednesday, “with the downside risks to growth from the trade war outweighing any upside to inflation from tariffs in our view.”
Desjardins analyst Tiago Figueiredo, however, said in a research note the central bank’s rate decision will be “a coin toss.”
U.S. President Donald Trump has threatened, withdrawn and imposed a dizzying array of tariffs on Canadian goods, and more levies are expected in coming months.
Canada has imposed retaliatory tariffs on a range of U.S. goods in a trade war between the neighbours who had usually swapped billions of dollars in goods each day.
According to Statistics Canada, the March inflation slowdown was driven by lower prices for travel tours and gasoline “amid concerns of slowing global oil demand and slowing economic growth related to the threat of tariffs.”
Air transportation prices notably fell 12 per cent as Canadians took fewer trips to the United States.
The costs of cellular services amid promotions and computer equipment also fell, while rents and mortgage interest costs as well as car insurance premiums rose.
March was also the first full month since the end of a sales tax holiday, pushing up costs of some consumer goods and dining out.
