Canada CPI expected to edge lower in February ahead of BoC rate meeting

• Canadian inflation is expected to rise by 2.1% YoY in February.
• The core CPI is still seen well above the BoC’s 2% target.
• The Canadian Dollar remains on the defensive vs. the US Dollar.

On Monday, attention in Canada will turn to the release of February’s Consumer Price Index (CPI) figures. The data from Statistics Canada will offer the Bank of Canada (BoC) a fresh read on inflation dynamics just ahead of its March 18 meeting, where policymakers are widely expected to leave the policy rate unchanged at 2.25%.

Economists anticipate headline CPI rising by 2.1% YoY in February, still above the BoC’s target but easing from January’s 2.3% annual increase. On a monthly basis, prices are projected to rise 0.4%. Policymakers will also keep a close eye on the core measure, which excludes food and energy, that is set to increase by 2.4% after printing at 2.6% YoY in the opening month of 2026.

Analysts remain uneasy as inflation remains above the BoC’s target, although it has shown some cooling in January. The risk of US tariffs feeding into domestic prices is still seen as adding another layer of uncertainty.

What can we expect from Canada’s inflation rate?

At its latest meeting, the central bank signalled that policy is broadly where it needs to be to keep inflation close to the 2% target, assuming the economy evolves as expected. Still, officials were careful to stress that they are not operating on autopilot. Should the outlook weaken or inflation risks re-emerge, they stand ready to adjust policy accordingly.

When it comes to inflation, the message was cautiously reassuring. Headline price growth is expected to hover around the target, with spare capacity in the economy helping to offset part of the cost pressures linked to ongoing trade reconfiguration. That said, underlying inflation remains somewhat elevated, a reminder that the disinflation process is still incomplete.

Inflation therefore remains the key variable to watch. The latest data showed headline CPI easing to 2.3% YoY in January, while core inflation moderated to 2.6% YoY. The Bank’s preferred gauges, CPI-Common, Trimmed Mean and Median, also softened. However, at 2.7%, 2.4% and 2.5%, respectively, they continue to run above the 2% objective.

When is the Canada CPI data due, and how could it affect USD/CAD?

Markets will turn their full attention to Monday at 12:30 GMT, when Statistics Canada releases its latest inflation figures. There is a noticeable sense of caution ahead of the print, with traders wary that price pressures may prove stickier than expected and keep the broader inflation trend from easing too quickly.

A stronger-than-expected reading would likely revive concerns that tariff-related costs are beginning to filter through to consumers. That scenario could push the Bank of Canada towards a slightly more cautious tone in the near term. It would also tend to offer the Canadian Dollar (CAD) some short-term support, as investors reassess the policy outlook in light of evolving trade tensions and their potential impact on inflation.

Pablo Piovano, Senior Analyst at FXStreet, notes that the Canadian Dollar has surrendered a large portion of its monthly gains in recent sessions, allowing USD/CAD to rebound sharply and approach the 1.3750 area after finding a monthly base near 1.3530.

According to Piovano, a continuation of the renewed bullish momentum could see the pair challenge the March peak at 1.3752 (March 3), followed by the key 200-day SMA near 1.3800. Beyond that, attention would shift to the provisional 100-day SMA around 1.3810, ahead of the 2026 high at 1.3928 (January 16).

On the downside, Piovano highlights initial support at the monthly low of 1.3525 (March 9), followed by the February trough at 1.3504 (February 11) and the 2026 bottom at 1.3481 (January 30).

“In addition, momentum indicators continue to lean modestly bullish. The Relative Strength Index (RSI) is approaching the 59 area, while the Average Directional Index (ADX) near 14 suggests the trend still lacks strong conviction,” he adds.