Canada: More Core Disinflationary Pressures in March April 16, 2024

Bank of Canada Governor Tiff Macklem got exactly what he was hoping for in the latest release. Despite a slight increase in headline and ex-food and energy inflation, a host of other metrics tracking underlying pressures point to a further normalization in consumer price growth.

Shelter remains the single most important contributor to total inflation (Graph 1). Excluding shelter, inflation is tracking just 1.5% and has been below the central bank's 2% target for most of the past six months. High and rising shelter costs, coupled with the recent increase in gasoline prices, appears to be eating away at consumer finances. That's seeing many businesses finding it more difficult to raise prices as quickly or as frequently as they were in recent years.