Bank of Canada's job just got 'even harder': Economists on the latest inflation numbers

February’s consumer price index report took economists by surprise as the rate of inflation accelerated on a year-over-year basis to 2.6 per cent in February, outpacing analyst estimates for a 2.2 per cent increase.

Statistics Canada said the end of the GST/HST holiday in mid-February was the main reason for the pickup in inflation, which jumped from 1.9 per cent in January.

Here’s what economists think the new data means for the Bank of Canada and interest rates.

The “upside surprise makes the Bank of Canada’s job even harder,” Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said in a note.

He said the inflation numbers cast doubt on expectations that policymakers will cut interest rates for an eighth consecutive time at their next policy meeting on April 16.

The CPI outstripped estimates, but, more importantly, the central bank’s preferred measures of core inflation, which remove taxes, also rose last month, Brown said.

CPI-trim and CPI-median increased to an annualized three-month average rate of 3.3 per cent, which is above the top end of the Bank of Canada’s inflation target range of three per cent.

“The upshot is that, despite the downside risks to the economic outlook from U.S. tariffs, we may need to revisit our view that the (Bank of Canada) will cut interest rates again as soon as next month,” Brown said.

The Bank of Canada warned it had considered holding interest rates when it cut on March 12, despite the threat United States tariffs pose to the economy.

Royce Mendes, managing director and head of macro strategy at Desjardins Group, said the latest inflation report gives policymakers plenty of reason to “temporarily” pause rate cuts as inflation appears to be on the march again.