(Adds Macklem comment from House testimony, updates Canadian
dollar)
By Ismail Shakil and Steve Scherer
OTTAWA, April 18 (Reuters) - Canada's annual inflation
rate eased in March to 4.3%, its slowest pace in 19 months but
still more than double the Bank of Canada's 2% target, data
showed on Tuesday.
The headline inflation figure fell from 5.2% in February,
matching expectations, as a decline in energy prices helped
offset a record spike in mortgage costs, Statistics Canada data
showed on Tuesday.
"Inflation hasn't been running this slow since 2021, but
that's still not enough to satisfy Canadian central bankers who
are laser-focused on returning price growth to its 2% target,"
said Royce Mendes, head of macro strategy at Desjardins Group.
Month-over-month, the consumer price index was up 0.5%, also
in line with forecasts. Gasoline prices fell for a second month
in a row on an annual basis. Food prices gained 9.7% annually in
March, down from 10.6% in February.
Last week, the Bank of Canada (BoC) held its benchmark
interest rate at 4.50%, as expected, but struck a hawkish tone,
playing down market expectations for a rate cut this year as the
risk of a recession diminished.
"Inflation is coming down quickly - data this morning show
it fell to 4.3% in March," BoC Governor Tiff Macklem said in
testimony in the House of Commons. Last week, the bank projected
that headline inflation would cool to about 3% by mid-2023.
"Continued strong demand and the tight labour market are
putting upward pressure on many services prices, and those are
expected to decline only gradually," keeping the headline figure
from hitting 2% until the end of 2024, Macklem added.
Services prices rose 5.1% annually in March, while the price
of goods increased by 3.6%, Statscan data showed. The March
inflation reading benefited from a comparison to last year's
strong price increase.
The average of two of the BOC's core measures of underlying
inflation, CPI-median and CPI-trim, came in at 4.5% compared
with 4.9% in February.
"I would characterize this as modestly good news," said Doug
Porter, chief economist at BMO Capital Markets. "We did see the
expected come down in all the core measures. Things are mostly
unfolding as expected."
Price rises of store-bought food slowed to 9.7% in March,
falling below 10% for the first time in eight months. Excluding
food and energy, prices rose 4.5% compared with a rise of 4.8%
in February.
Energy prices declined 6.9% annually in March while mortgage
interest costs surged 26.4% annually, the largest yearly
increase on record, as Canadians continued to renew and initiate
mortgages at higher interest rates, Statscan said.
The Canadian dollar was trading 0.1% higher at 1.3385
to the greenback, or 74.71 U.S. cents.
(Reporting by Ismail Shakil, Steve Scherer and Dale Smith in
Ottawa, Fergal Smith in Toronto; editing by Chizu Nomiyama,
Susan Fenton, Mark Heinrich and Jonathan Oatis)
