Canada’s annual inflation rate climbed to 2.4 percent in March, driven by a surge in fuel prices, according to Statistics Canada’s latest report on Monday. The spike in energy costs, particularly gasoline, attributed to the ongoing conflict in Iran, pushed inflation upwards. Energy prices saw a 3.9 percent increase compared to a year ago, with gasoline prices skyrocketing by 21.2 percent in March, marking the largest monthly rise on record.
Statistics Canada highlighted that inflation would have been even higher if not for the comparison with last year’s prices that still included the consumer carbon tax, which was eliminated in April 2025. The increased fuel expenses also impacted transportation costs, rising by 3.7 percent year over year in March, contributing to the overall inflation hike.
The cost of food at stores saw a 4.4 percent year-over-year increase, up from 4.1 percent in the previous month. Notably, fresh vegetable prices surged by 7.8 percent in March, attributed to challenging growing conditions for cucumbers, peppers, and celery.
Economists had anticipated the rise in gas prices due to the oil crisis in the crucial Strait of Hormuz, which has disrupted a significant portion of the world’s oil supply, resulting in fuel shortages and surging gas prices globally. CIBC economist Andrew Grantham remarked that the inflation spike in March was expected, with the main question being the extent of the increase.
Grantham predicted a continued rise in gas prices, impacting inflation in the upcoming month. However, he anticipates that the suspension of the federal fuel excise tax, effective starting Monday, may help alleviate this impact in May. Excluding gas prices, Statistics Canada indicated that inflation would have reached 2.2 percent.
Douglas Porter, the chief economist at the Bank of Montreal, noted that core inflation, excluding volatile factors like gasoline, was less severe than anticipated. The Bank of Canada is closely monitoring the March inflation data before its next interest rate decision on April 29. While the initial inflationary surge linked to the Middle East conflict will be overlooked, the central bank aims to prevent higher gas prices from translating into prolonged inflationary pressures.