Economists believe that inflation in February increased due to the increase in gasoline prices. This incident shows that returning to two percent inflation is challenging. Statistics Canada is scheduled to release its February consumer price index report on Tuesday. Economists predict that prices have increased by 3.1 percent compared to last year. This is while the annual inflation rate was reduced to 2.9% in January.

"It looks like inflation will remain in the three percent range for the next few months," said Royce Mendez, managing director and head of macro strategy at Desjardins. A slight increase in inflation will complicate matters for the Bank of Canada as the central bank was expected to start cutting its policy interest rate in the coming months.

Bank of Canada Governor Tiff Macklem has previously stressed that the central bank will not cut interest rates prematurely and will wait for clearer evidence that inflation is returning to the two percent target. The central bank has kept its key interest rate steady at five percent since July and is awaiting further evidence that inflation is approaching two percent.

The latest forecast of many economists indicated that inflation will reach that target in 2025. But the uncertainty in predicting the price of gasoline usually has a significant effect on inflation. Although the central bank is not expected to change rates next month, many forecasters believe the central bank will do so at its next policy meeting in June.

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