Ottawa – Arab Canada News

The annual inflation rate in Canada recorded an unexpected slowdown in March, reaching 2.3% compared to 2.8% in February, according to data released this morning by Statistics Canada, which strengthens hopes for the nearing end of the monetary policy tightening cycle, but does not completely close the door on caution regarding the persistence of price pressures.

This decline in the Consumer Price Index is the lowest since mid-2023, and it contradicts analysts' expectations who anticipated the rate to remain close to 2.6%.

However, on the other hand, the agency revealed that core inflation measures, which are closely monitored by the Bank of Canada, remain relatively high, reflecting continued pressures in certain sectors of the economy, such as services and housing.

Gas Prices Lead the Decline

Statistics Canada clarified that the decline in gas prices on a year-over-year basis was one of the main factors behind the slowdown in the overall inflation rate, in addition to a slowdown in food price growth compared to previous months.

Market Reaction and Interest Rate Decision Anticipation

The markets reacted cautiously to the new figures, as analysts believe that this data may lead the Bank of Canada to delay any interest rate cuts in the near term, especially in light of the continued rise in core measures.

The central bank had maintained its key interest rate at 5% during its last meeting, emphasizing that its future decisions will depend on "incoming economic data," including inflation indicators and the labor market.

The Next Step

Investors and financial policymakers are expected to closely monitor the upcoming consumer price index report in April, along with GDP and labor market data, to assess whether the current slowdown reflects the beginning of a long-term trend towards financial stability or merely a temporary slowdown in the pace of price increases.