Canada’s headline inflation continues to be benign despite rise in price pressures in March

Headline inflation in Canada remains benign with energy prices continuing to be in negative territory on an annual basis. However, core inflation is showing some resilience. Various categories saw somewhat stronger price pressures in March, noted TD Economics. Last month, Canada’s consumer prices rose 1.3% y/y, slowing down from February’s 1.4% y/y pace.  Core inflation, excluding eight volatile items, accelerated 2.1% y/y, as compared with 1.9% y/y in February.

Prices at pump increased last month, but Canada’s inflation continues to face downward pressure due to lower oil prices. Inflation, stripping gasoline, accelerated 1.9% on year-on-year basis last month. Food and shelter prices rose 3.6% y/y and 1.1% y/y respectively, primarily exerting upward pressure on inflation. Meanwhile, the overall inflation is also being curbed by prices of clothing and footwear that fell 0.4% y/y.

On a monthly basis, favorable base year effects masked solid price growth. Following a drop in the previous month, seasonally-adjusted headline prices were up 0.2% in March. Meanwhile, core prices rose 0.3% after rising 0.2% in February.

Canada’s core inflation continues to be largely on the central bank’s target rate. Core inflation’s slight acceleration last month is not expected to worry the Bank of Canada. The country’s economy continues to deal with the tough adjustment to the lower oil prices, while the monetary policy’s current stance of stimulus continues to be necessary, said TD Economics.