Home Buying

Inflation Rose to 2.9% in March, Keeping the Dream of Rate Cuts Alive for June

Inflation Rose to 2.9% in March, Keeping the Dream of Rate Cuts Alive for June

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    As the fight against inflation continues, Canada’s inflation rate in March 2024 rose to 2.9%, around what analysts expected.


    Key Takeaways

    • Canada’s inflation rate rose to 2.9% in March 2024. 
    • The largest contributor to deceleration was lower prices for cellular service plans in February. 
    • After the CPI reading, the first rate cut could occur at the June 5th Bank of Canada announcement. 

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    Inflation Slows

    The most recent inflation rate of 2.9% was up slightly from 2.8% in February. Gasoline prices were the largest contributor to inflation, up 4.5%, following an increase of 0.8% in February. Higher prices at the pumps are largely due to supply concerns, geopolitical conflict, and voluntary production cuts. 

    The latest data from Statistics Canada shows that the measures of core inflation, which the Bank of Canada closely monitors, have fallen to 3.1% for CPI-trim and 2.8% for CPI-median.

    These figures continue to move closer to the central bank’s inflation target of 2%. However, shelter continues to be the largest driver of inflation, up 6.5% in March.

    Shelter Continues to Climb

    Canadians continue to feel the impact of rising prices as shelter increased 6.5% year-over-year. Mortgage interest costs rose 25.4% year-over-year in March, following a 26.3% increase in February. Rent prices continue to climb, rising 8.5% year-over-year after an 8.2% increase in February. 

    Higher interest rates continue to make homebuying more expensive, forcing many to stay in the rental market and creating further competition that impacts rental prices. Shelter costs continue to be the largest driver of inflation out of the 8 CPI components.

    Is a June Rate Cut a Possibility?

    At the April 10th announcement, the bank held rates again at 5%, continuing its policy of quantitative tightening (QT). The Bank of Canada cited that inflation remains too high based on the economic outlook, and risks remain.   

    At this point, a rate cut in June could be on the table. The Bank of Canada (BoC) has hinted recently that the economy is moving in the right direction. However, The Governing Council has cited that they will look for evidence of sustained downward movements in inflation.

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      How Does Canada Compare?

      When looking at global inflation rates, Canada’s 2.9% rate for March 2024 is much better than what the rest of the world is currently experiencing. Many countries are seeing inflation climb higher. US inflation rose 3.5% in March, up from 3.2% in February. 

      Frequently Asked Questions

      Welcome to our Frequently-Asked Questions (FAQ) section, where we answer the most popular questions designed and crafted by our in-house mortgage experts to help you make informed mortgage financing decisions.

      What is the inflation rate?

      The inflation rate is a measure of the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling. Central banks attempt to limit inflation to keep the economy running smoothly.

      Why is the inflation rate important?

      The inflation rate is an important economic indicator because it affects the value of money and indicates the health of an economy. A moderate rate of inflation is generally considered normal in a growing economy. However, high inflation can erode purchasing power and create economic uncertainty.

      How is the inflation rate calculated?

      The inflation rate is calculated by comparing the current Consumer Price Index (CPI) to the CPI in a previous period. The CPI measures the average change in prices over time that consumers pay for a basket of goods and services.

      Final Thoughts

      The March 2024 inflation rate of 2.9% in Canada may mean that the economy is correcting as it feels the impact of monetary policy. The BoC may finally cut rates at the June 5th announcement. However, they will continue to monitor the situation closely and make adjustments in the future, if necessary, in an effort to keep inflation within the target. It’s possible that if April’s inflation comes in higher when announced at the end of May, rates could be paused again.

      Whether you’re a homeowner with a mortgage, a renter, a business owner, or simply a consumer, it’s important to keep an eye on the inflation rate and understand what it means for you. As we move into the spring lending season, it will be interesting to see how the Bank of Canada responds to these latest inflation figures and what that might mean for the Canadian economy.

      If you’re a homeowner or homebuyer, shopping around for the best mortgage that fits your goals can be challenging. Contact nesto’s mortgage experts and learn how you can turn this challenge into an opportunity to save on your mortgage or renewal.


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