FX.co ★ Canada Inflation Rate Unexpectedly Softens

In March 2025, Canada's annual inflation rate decreased to 2.3%, down from the eight-month high of 2.6% recorded in February. This reduction fell short of the market's expectation of a sustained 2.6% and was also below the Bank of Canada's forecast of 2.5%. The decline marks the beginning of the predicted stabilization of inflation for this year, following the cessation of the goods and services tax (GST) and harmonized sales tax (HST) breaks that concluded midway through the previous month, which had earlier spurred a 0.6 percentage point rise in the overall inflation rate. A notable factor contributing to this decrease was a reversal in gasoline prices, which fell by 1.6% compared to a 5.1% increase in February. This change was driven by a substantial drop in crude oil prices after OPEC+ announced plans to boost production, subsequently causing a slowdown in transportation inflation (1.2% compared to 3% previously). Meanwhile, competitive promotions among carriers resulted in a significant drop in cellular service costs by 8.8% (from a previous decline of 3.7%). Conversely, the removal of tax breaks led to a noticeable rise in food costs, which surged by 3.2% from the previous 1.3%, particularly for food purchased from restaurants, which increased by 3.2% after a prior decline of 1.4%. Month-over-month, prices saw a modest increase of 0.3%.