March CPI Stats: Unexpectedly Low At 2.3%
- Mark
- 3 days ago
- 3 min read
March 2025 Inflation Eases in Canada: Is a Rate Cut Next?
Canadian consumers got some breathing room in March as inflation cooled more than expected, despite the end of the winter tax holiday.
According to Statistics Canada, the Consumer Price Index (CPI) rose 2.3% year-over-year in March—down from 2.6% in February and below most economists’ forecasts. This softer-than-expected reading comes even as some goods, including food, alcohol, and children’s items, were re-subjected to GST and HST taxes.
What's Behind the Drop in Inflation?
Lower gas and travel prices played a major role in March’s easing inflation.
Drivers saw a 1.6% year-over-year drop in gas prices—reversing February’s 5.1% increase—largely due to the removal of carbon pricing and falling global crude oil rates. Ongoing trade tensions and reduced global demand expectations have helped push oil prices lower.
Travel also saw a significant pullback. Statistics Canada reported that travel tours fell 4.7% annually in March (after an 18.8% spike in February), while airfare prices plunged 12% year-over-year. Travel from Canada to the U.S. saw notable declines, contributing to the overall dip in tourism-related costs.
Food Prices Still Rising
While overall inflation slowed, Canadians are still feeling the pinch at the grocery store. Food prices rose 3.2% year-over-year, both for groceries and restaurant meals. Restaurant prices have returned to levels seen before the temporary tax relief in late 2024.
StatCan notes that if food prices were excluded, the CPI would have increased just 2.1% annually—nearly in line with the Bank of Canada’s 2% inflation target.
Housing Costs: A Mixed Picture
Shelter costs remain a key driver of inflation, though the pace of growth is cooling. The overall shelter index rose 3.9% from March 2024, but only 0.2% from February.
Mortgage interest costs were up 7.9% year-over-year—down from 9% in February and 10.2% in January. That’s a sharp improvement from 2023, when this metric peaked near 30%.
Rent prices continue to climb, rising 5.1% annually.
The downward trend in mortgage interest costs reflects the Bank of Canada’s ongoing rate cuts, which began in mid-2024. However, overall interest rates remain high by historical standards.
Will the Bank of Canada Cut Rates Again?
The central bank is likely encouraged by March’s inflation data—but it may not be enough to guarantee another rate cut.
Key inflation indicators closely watched by the Bank of Canada, known as the core median and core trim measures, held firm at 2.9% and 2.8%, respectively. Though these have now remained below 3% for three straight months—a potentially encouraging sign—they are still above the BoC’s comfort zone.
A further cut to the policy rate, currently at 2.75%, is possible when the Bank meets on April 16th, but ongoing uncertainty from global trade disputes and the stickiness in core inflation could lead to a more cautious "wait-and-see" approach.
Expert Insight: A “March Break” for Inflation
"After a couple months of high-side surprises, Canadian inflation caught a serious March break, held down by much milder travel costs than normal," noted BMO Chief Economist Douglas Porter in a post-release analysis.
He pointed to Canada’s lighter tariff response and a firming Canadian dollar as additional factors helping to restrain inflation. Porter also expects gas prices to continue falling in the near term.
"Normally, this would be a green light for the BoC to cut tomorrow," he added, "but core inflation is still hovering near 3%, and policymakers are navigating the uncertainty of a shifting global trade landscape."
Final Thoughts
March’s inflation data offers a glimmer of relief for Canadians, especially those watching fuel and borrowing costs. While it may not be enough to guarantee an immediate interest rate cut, it does signal progress toward more stable prices. For homeowners, renters, and investors alike, keeping a close eye on inflation—and the Bank of Canada's response—will be key as we move through 2025.
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Disclaimer: The information provided in this blog post is for general informational purposes only and should not be construed as professional advice. REXIG Realty Investment Group does not guarantee the accuracy, completeness, or timeliness of the content. Readers are encouraged to seek professional advice tailored to their specific situation before making any real estate or investment decisions. REXIG Realty Investment Group is not responsible for any actions taken based on the information provided