MNI: Canada Inflation Unexpectedly Slows On Travel and Gas

Canada's inflation rate unexpectedly slowed in March as a fall in gasoline prices and U.S. travel were more powerful than a lift triggered by the end of a federal sales tax break, the last figures central bank officials see before Wednesday's interest-rate decision on whether to cut borrowing costs an eighth time. 

Statistics Canada's consumer price index rose 2.3% from a year earlier compared with the pace of 2.6% that was recorded in February and economists expected to see again in this report. Gasoline prices fell 1.6% following February's 5.1% increase, reflecting a drop in global crude oil costs. Air transportation prices fell 12% following a 4.4% decline in February as Canadians curbed U.S. travel in response to Donald Trump's threats of tariffs and economic domination.

The slowdown in headline prices wasn't matched in core measures. The median index remained at 2.9%, well above the Bank's 2% headline target, and the trim index declined a tenth of a point to 2.8%. There was some upward pressure related to the end of the federal sales tax holiday in mid-February, with restaurant meal prices rising 3.2% after a 1.4% decline in February.

The Bank of Canada has cut borrowing costs seven times to 2.75% from 5% starting in June, and Governor Tiff Macklem has said he’ll be cautious about more easing as a tariff war hits both growth and inflation. Economists are split on whether the BOC will hold or cut another 25bps on Wednesday, though they see another two or three reductions later this year as exports and investment weaken amid the trade war.