Canadians got a break on inflation in March as gas prices felland a slowdown in travel to the United States helped cool airfare costs, Statistics Canada said Tuesday.
The annual rate of inflation slowed to 2.3 per cent last month, down from 2.6 per cent in February. A poll provided by LSEG Data & Analytics ahead of Tuesday’s release had expected yearly inflation to hold steady month-to-month.
StatCan said gas prices fell 1.6 per cent year-over-year inMarch, coming off a hike of 5.1 per cent in February.
The agency also pointed to a drop of 4.7 per cent annually inprices for travel tours last month following a sizeable jump over the long weekend in February.
Airfare costs were down 12 per cent year-over-year in March, StatCan said, and rose only slightly month-to-month.
StatCan said the cooling in flight costs came as fewer Canadians traveled to the United States last month, when many families typically get away for March break.
March marked the beginning of the United States’ tariff war with Canada, which has prompted some consumer backlash toward U.S. travel and products in recent weeks.
"This speaks to the fact that the inflation impact of the trade war is more of a two-way street for Canada than the U.S., since Canada's tariffs are so much lighter so far, while the domestic economy is under more pressure," said Doug Porter, BMO chief economist, in a note to clients Tuesday.
Cellular prices were also down 6.8 per cent in March from a month earlier, which StatCan said was a result of lower costs for cell plans and industry-wide promotions.
Limiting the overall slowdown in inflation was the end of the federal government’s temporary tax holiday in mid-February.
March was the first full month without the federal sales tax relief on a variety of household staples and dining out, which StatCan said provided some lift in the inflation figures compared with February.
Restaurant prices, for instance, rose 3.2 per cent annually inMarch following a 1.4 per cent decline in February. Overall food costs including groceries also rose 3.2 per cent year-over-year, up from 1.3 per cent a month earlier.
The March inflation data comes a day before the Bank of Canada is expected to make its next interest rate decision on Wednesday.
The central bank cut its benchmark rate by a quarter point to2.75 per cent last month.
Katherine Judge, senior economist at CIBC, said in a note that the drop in the headline number, alongside signs underlying inflation cooled, sets the Bank of Canada up for another cut inthe face of trade uncertainty with the United States.
"The easing in price pressures is consistent with the Bank of Canada cutting interest rates by (a quarter-percentage point) at tomorrow's meeting, with the downside risks to growth from the trade war outweighing any upside to inflation from tariffs in our view," she said.
BMO's Porter noted however that the Bank of Canada's path forward is less clear as the central bank's preferred measures of core inflation hold just below three per cent and "policymakers are operating in the dense fog of an ever-shifting trade war."
This report by The Canadian Press was first published April 15, 2025.
