Inflation Dipped to 2.3% in March

As a good news start to the day, on April 15th, StatCan released data that indicated Total Inflation had dipped to 2.3% in March, down from 2.6% in February. The next day, the Bank of Canada announced the Key Rate was held at 2.75%. Good news — economists are currently predicting that inflation will continue dropping. And even lower inflation means there will likely be a Key Rate cut at the next BoC meeting on June 4th.

Why is inflation expected to keep dropping? One reason is that on April 1st, the Carbon Tax charge was eliminated from the cost of a litre of gasoline. Great news for commuters. However, according to some economists, the removal of the Carbon Tax may just lead to a short-term drop in inflation. Other pundits expect that the drop in fuel prices may impact core measures over a longer period as it may become less expensive to transport groceries and consumer goods leading to lower prices across many sectors.

The caveat is that, in the coming weeks, we’ll be switching to “summer gas”, which can add three to ten cents to a litre of fuel. So, the current lower price of gas will see a bump-up.

Another watchout is tariffs. What sectors? When and how steep? It’s been a confusing few weeks of “on again, off again”. And the BoC will have to chart muddy waters of unclear data.

At present, some economists expect that inflation in April will continue to fall and could come in below 2%. That data will come out in mid-May. I will keep you posted.