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Canada’s annual inflation rate increased in March, predominantly due to higher gas prices, according to the latest report from Statistics Canada. 

The Consumer Price Index for last month was released on Tuesday, revealing that the overall inflation rate was up 2.9% year-over-year in March, an increase from 2.8% in February. 

According to Statistics Canada, the annual pace of inflation eased in February when compared to January, where it stayed at 2.9%.

Canadians were dinged with a 4.5% year-over-year price jump at the gas pumps last month, faced with only a 0.8% increase in February. 

Crude oil prices jumped up internationally as a cautionary response to supply concerns during “geopolitical conflict and continued voluntary production cuts,” reads the report.

Month-over-month, gas prices increased by almost 5% compared to February and shelter prices rose in March at the same annual rate of 6.5% as the month previous. 

Both were contributing factors in bringing Canada’s overall inflation up. 

“The mortgage interest cost index rose 25.4% on a year-over-year basis in March, following a 26.3% increase in February. The homeowners’ replacement cost index, which is related to the price of new homes, declined less in March (-1.0%) compared with February (-1.4%) on a year-over-year basis,” reads the report. 

“Rent prices continued to climb in March, rising 8.5% year over year, following an 8.2% increase in February. Among other factors, a higher interest rate environment, which can create barriers to homeownership, put upward pressure on the index.”

The price of clothing and shoes had the highest decline in January and February since the beginning of the Covid-19 pandemic, however, they increased by 1.8% last month. 

Grocery costs increased 1.9% in March, back up again from some relief seen in February, where it decreased by 3.4% in January and 2.4% in February. 

The CPI comes only a week after the Bank of Canada announced it would be holding its key interest rate at 5% for the sixth consecutive time. The central bank also noted in their release that it’s “within the realm of possibilities” that Canadians could see an interest rate cut in June.  

However, this would only be possible if the Bank of Canada sees sustained evidence that the economy is on track to hit its 2% target. 

The Statistics Canada report comes just ahead of the federal government’s budget announcement later today.