Canadian annual inflation accelerated in March on the biggest one-month increase in gasoline costs in a decade, bringing price pressures back up near the Bank of Canada’s target.

Annual consumer price inflation rose to 1.9 per cent from 1.5 per cent in February, Statistics Canada said Friday from Ottawa. The number was in line with analyst expectations. Core measures -- seen as a better gauge of underlying prices -- also ticked up to 1.97 per cent, from 1.9 per cent, and came in much stronger than the 1.8 per cent anticipated by economists.

Key Insights

-While sharp movements in gasoline prices have generated volatility in Canada’s headline inflation number over the past year, underlying price pressures have largely been stable near the Bank of Canada’s 2 per cent target.

-The inflation pick-up in March simply brings the headline number into line with core readings. The core figures have barely budged over the past year, averaging at about 1.9 per cent, suggesting a largely benign environment for inflation -- neither too high nor too soft to pull the Bank of Canada off the sidelines.

-While the core readings did come in higher than expected in March and the last two months have shown some signs of inflation strengthening, a weaker economy in recent months may keep pressures in check and limit any upside.

-This seems to be the view of the Bank of Canada, which has taken a dovish tilt on policy in recent weeks.

-The central bank anticipates inflation will remain below its 2 per cent target for most of this year.

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-On a monthly basis, consumer prices rose 0.7 per cent, in line with analyst estimates.

-Gasoline prices jumped 12 per cent, the biggest one month gain since 2007.

-On a seasonally adjusted basis, the figures show some strengthening in inflation.

-Prices were up 0.3 per cent in March after a 0.4 per cent gain in February.

-It’s the strongest back-to-back gain since August. But there are few signs of any major inflationary pressure in the report. 

-Inflation in the service sector was down to 2.2 per cent in March, from 2.3 per cent in February. Excluding gasoline, consumer price inflation was 2.2 per cent.

--With assistance from Erik Hertzberg.