Canada: Annual CPI jumps to 6.7% in March versus expected rise to 6.1%

• The YoY rate of headline CPI jumped to 6.7% in March from 5.7%, well above expected. 
• Core measures were also spicey and the loonie saw some initial knee-jerk strength on the data. 
• The figures will solidify expectations for aggressive tightening from the BoC.  

Annual headline inflation in Canada jumped to 6.7% in March, according to the latest Consumer Price Index (CPI) figures released by Statistics Canada on Wednesday. That was well above the median economist forecast for a rise to 6.1% from 5.7% YoY in February. The larger than expected jump in the YoY rate was powered by a larger than expected 1.4% rise in prices, as per the CPI, on a MoM basis. Expectations were for a 1.0% MoM rise in prices, following a 1.0% rise in February. 

The Core inflation numbers were also spicey. The YoY rate of inflation as per the Core CPI came in at 5.5%, a surprise jump from February's 4.8% reading. Median expectations had been for a fall to 4.2%. That was powered by a surprise rise in the MoM rate of Core inflation to 1.0%, versus an expected fall to 0.5% from 0.8% in February. 

The BoC's Median CPI measure came in at 3.8%, up from 3.5% in February, the BoC's Trimmed measure came in at 4.7%, up from 4.3% in February and the BoC's Common measure came in at 2.8%, up from 2.6%. That meant the mean of the BoC's measures of Core Canadian inflation rose to 3.77% from 3.47% in February. 

Market Reaction

With the latest spicey Canadian inflation figures bolstering the case for continued aggressive BoC monetary tightening (the central bank lifted interest rate by 50 bps last week), the loonie was initially stronger in wake of the data release. USD/CAD dipped briefly below 1.2520, but has since recovered back to pre-data release levels in the 1.2530s.