Canada’s consumer price inflation slows in March

Canada’s consumer price inflation slowed in the month of March on a year-on-year basis. The CPI index fell to 1.6 percent in March from February’s 2 percent year-on-year. Most the categories witnessed a subdued price growth in the month. Slowdown in energy prices mainly led the way.

Transportation price growth decelerated to 4.6 percent year-on-year in March from February’s 6.6 percent. The headline inflation was weighed on by falling food prices and clothing and footwear prices that dropped 1.9 percent year-on-year and 0.9 percent year-on-year respectively.

Moreover, the Bank of Canada’s gauge for core inflation softened. The CPI-median fell to 1.7 percent from 1.8 percent, whereas CPI-trim edged down to 1.4 percent from 1.5 percent. The CPI-common remained at 1.3 percent.

Decelerating inflation in Canada provides the central bank with scope to wane some of that strength and wait for the affirmation that it will be sustained, noted TD Economics in a research report. The slowdown in the core measures signifies that the Canadian central bank will not be in any hurry to remove accommodation.

Subdued inflation and wage growth show that Canada’s economy continues to perform under its potential. With more rapid economic growth, the output gap might eventually close and start to put upward pressure on inflation. But that is expected to take place in 2018 and not in 2017, added TD Economics.