Canada's inflation rate jumps to 2.4%, fuelled by gas price shock
Canada’s inflation rate accelerated to 2.4 per cent in March, up from 1.8 per cent in February, as gasoline prices spiked because of oil supply disruptions in the ongoing Iran war.
Gas prices rose more than 21 per cent in March from the month before — “the largest price increase for gasoline on record, due to the supply shock resulting from the conflict in the Middle East,” Statistics Canada said Monday.
Overall, energy prices rose 3.9 per cent in March after falling 9.3 per cent in February.
Statistics Canada noted that gasoline prices in March 2025 still included the consumer carbon tax, which was removed in April 2025.
With that levy gone, “the impact of energy on inflation is set to get much larger in next month’s data,” said Leslie Preston, managing director and senior economist at Toronto-Dominion Bank.
Preston said in a note that while oil prices have dropped in recent days, they are still almost 40 per cent higher than a year ago.
“That means energy prices are likely to keep headline inflation elevated for some time,” she said. “April’s inflation reading is likely to head much higher as the dampening effect of the removal of the consumer carbon levy falls out of the year-on-year inflation calculation.”
Excluding gasoline, the consumer price index (CPI) rose 2.2 per cent in March.
Prices for food purchased in stores rose 4.4 per cent in March, up from 4.1 per cent in February. Prices for fresh vegetables rose 7.8 per cent, the biggest increase since August 2023. The agency also said the price growth for cucumbers, peppers and celery was “notable” due in part to “tighter supplies related to adverse growing conditions in producing countries.”
Lingering effects of the end of GST/HST last year slowed inflation on some goods. Prices for restaurant food increased 3.2 per cent in March, down from a 7.8 per cent pace in February. Prices for alcoholic beverages purchased from stores, as well as toys, games (excluding video games) and hobby supplies also grew at a slower pace.
Andrew Grantham, executive director and senior economist at Canadian Imperial Bank of Commerce, said in a note that so far there is only a “limited sign” of higher gas prices passing through to other areas.
He said core inflation was “tamer than expected” in March, with four measures (CPI-trim, CPI-median, CPI-X and CPI excluding food and energy), averaging 1.4 per cent on a three-month annualized basis.
Economists expect higher gasoline prices will cause headline inflation to further accelerate to around three per cent in April.
Grantham said inflation will “hopefully” ease back slightly in May, partly due to the removal of the federal fuel excise tax that came into effect on Monday.
“Pass-through from higher energy prices into core measures of inflation may become more evident closer to the summer months, particularly as higher air fares are picked up more fully, but slack within the Canadian economy should prevent those measures from reaccelerating too much, enabling the Bank of Canada to remain on the sidelines through 2026,” Grantham said.