Canada’s inflation rate picked up slightly in March to 2.9 per cent from 2.8 per cent in February, Statistics Canada said Tuesday, but the consumer price index (CPI) release suggested that core inflation continued to slow.

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Here’s what economists are saying about the latest numbers and what they could mean for the Bank of Canada, which has signalled that an interest rate cut is possible at its next meeting on June 5 if inflation continues to cool.

‘First cut at June meeting’: CIBC Capital Markets

The latest consumer price index data meet the Bank of Canada’s requirement for core inflation, Andrew Grantham, an economist with CIBC Capital Markets, said in a note.

CPI core trim and median — the central bank’s two preferred measures of inflation — slowed to 3.1 per cent and 2.8 per cent, respectively, more than analysts surveyed by Bloomberg expected.

Bank officials said in their April 10 interest rate decision that they would need to see continued evidence that core inflation was sustainably slowing before they would consider a first rate cut.

“Today’s data meets that requirement, although there is one more CPI print to come before the bank’s next policy decision,” Grantham said. “We continue to expect a first cut at that June meeting.”

What Macklem ‘was looking for’: Desjardins Group

“This type of release was exactly what he (Bank of Canada governor Tiff Macklem) was looking for,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note. “As a result, we are retaining our call for a rate cut in June.”

Besides the slowdown in the central bank’s preferred core measures, other results in the inflation report support a cut in June, Mendes said.

For example, the portion of components in the CPI basket rising more than three per cent shrank to 38 per cent from 41 per cent, while the share rising less than one per cent expanded. The Bank of Canada watches the first measure closely, Mendes said, adding that the more broad-based slowdown ought to bolster officials’ confidence that their two per cent inflation target is in sight.

“That said, co-operation from the federal government this afternoon (in the budget) and the next CPI release will both be key in seeing that forecast materialize,” he said.

Some economists are worried that increased spending by Ottawa could feed inflation.

‘Growing chance’ of June: Capital Economics

“There is a growing chance of the bank cutting interest rates at its next meeting in early June,” Olivia Cross, North America economist at Capital Economics Ltd, said in a note, citing the continued slowdown in the Bank of Canada’s most-watched core measures of inflation.

The central bank won’t be “too concerned” by the slight uptick in headline inflation that was partly the result of higher gasoline prices, Cross said.

However, inflation risks still persist as gas prices have climbed in April amid rising tensions in the Middle East.

“The good news for the bank is that, thanks to more favourable base effects from here, there is scope for headline inflation to fall in the coming months despite the rise in gasoline prices,” Cross said.

‘Welcome news’: BMO Economics

“The steady cooling in core inflation is welcome news,” Douglas Porter, chief economist at Bank of Montreal, said in a note, highlighting that three of four measures of core inflation have come in below three per cent “for the first time since the summer of 2021.”

Three per cent is the top end of the Bank of Canada’s inflation target range.

The three-month annual rate of inflation was 1.3 per cent and the annual rate CPI excluding food and energy was 2.9 per cent.

Inflation hot spots remain, Porter said.

Gas prices are on track for a six per cent “pop” in April and “shelter costs keep rolling along,” he said.

Still, “for the Bank of Canada, this result is likely just good enough to keep them on track for a potential trim in June.”

The next inflation report for April, plus first quarter GDP will either solidify or derail that outlook.

• Email: gmvsuhanic@postmedia.com

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