Economists debate how far the energy surge will spill into wages, rents, and retirement portfolios
Gasoline prices just logged their biggest monthly jump on record, but many economists say the more important story is still soft core inflation and a cautious Bank of Canada.
According to Statistics Canada, the Consumer Price Index (CPI) rose 2.4 percent year over year in March, up from 1.8 percent in February.
Energy, and especially gasoline, drove the acceleration. Excluding gasoline, the CPI increased 2.2 percent in March, slower than 2.4 percent in February.
On a monthly basis, the CPI rose 0.9 percent in March, or 0.5 percent after seasonal adjustment.
Statistics Canada reported that energy prices rose 3.9 percent year over year in March after a 9.3 percent decline in February.
Gasoline prices increased 5.9 percent versus a year earlier and surged 21.2 percent month over month, the largest monthly gasoline increase on record, due to a supply shock from the conflict in the Middle East.
Reuters said the war in Iran, which began at the end of February, disrupted crude shipments through the Strait of Hormuz and removed nearly a fifth of global supply, pushing up pump prices and straining household budgets.
BNN Bloomberg reported that oil prices hit their highest level since 2022, peaking near US$120 per barrel in March, while American crude traded over US$85 per barrel.
Statistics Canada said consumers paid 26.1 percent more for fuel oil and other fuels year over year in March, while lower natural gas prices, down 18.1 percent, helped moderate the overall energy increase.
Reuters reported that higher fuel prices lifted transportation costs, the second‑largest contributor in the CPI basket, by 3.7 percent year over year.
Economists quoted by BNN Bloomberg framed March as the start of a broader energy shock.
Pedro Antunes, chief economist at Signal 49 Research, said he expects a “run of inflation” in both March and April.
He said gasoline prices in April are roughly 30 percent above February levels, and warned that oil shocks show up first at the pump and in transportation costs before spreading through the wider economy.
At the same time, several analysts emphasised that core inflation remained subdued.
BNN Bloomberg reported that senior TD Bank Group economist Andrew Hencic described core measures, which strip out food and energy, as “relatively soft” in March.
He said this fit with earlier thinking that “excess slack in the economy was putting a little bit of downward pressure on prices before we really experienced this energy shock and the impacts that could come in the following months.”
The Financial Post reported that Bank of Montreal chief economist Douglas Porter said the Bank of Canada’s preferred core measures, CPI‑median and CPI‑trim, held “steady” at 2.3 percent year over year and slowed to 2.2 percent, while a measure excluding food and energy came in at a bit less than 2 percent.
David Rosenberg of Rosenberg Research told the Post that traditional core inflation excluding food and energy stood at 1.9 percent year over year, below the Bank’s 2 percent target, and that housing inflation slowed “on a seasonally smoothed basis” to 0.7 percent year over year, a 12‑year low, from 3.8 percent.
Rosenberg argued in the Post that the economy faces an output gap and a weak labour market that “hasn’t produced any net full-time positions since mid-2025.”
He said “the light is green for the Bank of Canada to resume its easing cycle once the US-Iran war finally does end, and a red light has now been established for any policy tightening.”
On policy expectations, Reuters noted that Canada’s inflation has stayed around the midpoint of the Bank’s 1 percent–3 percent target range for well over a year and reported that Governor Tiff Macklem said he was not concerned about a short‑term spike in inflation expectations.
CBC News reported that the Bank of Canada has signalled it will look through the initial inflationary spike tied to the Middle East conflict but will act to prevent higher gas prices from becoming longer‑term inflation.
Market pricing has already shifted.
The Financial Post reported that when the United States and Israel initially attacked Iran on February 28, markets briefly priced at least two 25‑basis‑point hikes in 2026, but bets have since receded to roughly one hike or less.
BNN Bloomberg reported that Antunes sees borrowing costs linked to bond yields already moving higher and said, “we’re already feeling the pinch of this inflation impact on essentially, financing costs, debt financing costs.”
Food and taxes round out the inflation picture.
Statistics Canada said prices for food purchased from stores rose 4.4 percent year over year in March, up from 4.1 percent in February, with fresh vegetables up 7.8 percent, the biggest increase since August 2023, led by cucumbers, peppers and celery amid tighter supplies.
BNN Bloomberg reported that overall food inflation slowed to 4 percent from 5.4 percent as a previous tax holiday dropped out of annual comparisons, but Antunes said “that has not eased at all yet” and warned of more pressure as natural gas disruptions hit the global fertiliser market.
Statistics Canada also pointed to lingering base‑year effects from the GST/HST break that ran from December 2024 to February 2025, which continued to exert downward pressure on headline inflation in March 2026.
The agency said this will be the final month in which the GST/HST break affects the 12‑month CPI figure.
