-- The Bank of Canada (BoC) has signaled a willingness to look through the energy-driven pick-up in headline inflation, said UBS.
However, the key thing the BoC will be watching will be the breadth of inflation pressures, which could widen a touch in the March print, but should remain similar to that seen in recent months and in line with the pre-pandemic period, wrote the bank in a note to clients.
Canada's central bank will also be focusing on its preferred measures of core inflation, both of which UBS expects to remain at 2.3% year over year in March.
With this, the bank thinks that the March inflation data is unlikely to tip the BoC toward tightening policy and there would need to be a broader-based rise in price pressures to warrant a quick shift in the policy stance.
UBS expects the BoC to remain on hold this year despite the current market pricing for +30bps of hikes.
Statistics Canada is slated to release the March consumer price index on Monday.