Higher gasoline prices in March in Canada, up 21% from February, are expected to push year-over-year growth in the headline consumer price index up to 2.5% from 1.8% in February, while inflation excluding food and energy ticks slightly higher to 2.2%, said RBC in a preview published Friday.
Canada is scheduled to release the CPI for March at 8:30 a.m. ET on Monday.
According to RBC, annual energy inflation will likely rise above 0 for the first time since spring last year, when the cancellation of the federal consumer carbon tax sent prices lower in April. In March, gasoline prices were up 6.8% from a year ago on average, but would have been up 23% without the impact of that tax change, the bank said.
RBC added the impact of the removal of the carbon tax will fall out of the yearly comparison in April. It noted gasoline prices have risen further, and to date are tracking more than 30% above a year ago. The temporary suspension of the federal fuel excise tax (10 cents per liter) coming into effect on Monday should blunt some of the impact.
Still, RBC estimates rising energy CPI will drive headline inflation above 3% in April.
RBC said food CPI has been biased higher by "unfavorable" annual comparisons in the prior months due to the federal HST/GST holiday last year and is set to ease in March, as the tax holiday in mid-February 2025. It added the focus in the coming months will increasingly shift to the extent surging energy prices spread into broader inflation pressures, best gauged by the Bank of Canada's core inflation measures that strip out more volatile components as well as effects from indirect taxes.
It noted these core inflation measures showed significant signs of easing ahead of the Middle East conflict. CPI trim and median averaged 1% on an annualized basis from December to February.