Canada’s Raw Materials Price Index rose by 12% in March. This was above the forecast of 9.3%.
The result was 2.7 percentage points higher than expected. The release compares the actual figure with the forecast.
The March Raw Material Price Index number is a significant surprise, coming in much hotter than anyone anticipated. This indicates that input costs for Canadian producers are accelerating, which will likely feed directly into broader inflation. We must now seriously reconsider the odds of a Bank of Canada rate cut in the second quarter.
This forces us to re-evaluate our positions on short-term interest rates. The market is now quickly pricing out the probability of a summer rate cut, with overnight index swaps showing a shift in expectations towards holding rates steady through the next meeting. We saw a similar dynamic in 2025 when a string of hot data points forced the Bank to delay its dovish pivot, and derivative markets that were positioned for cuts got burned badly.
For the Canadian dollar, this is a decidedly bullish signal. Higher interest rate expectations will attract capital, strengthening the loonie against the US dollar. We should be looking at buying call options on the CAD or selling USD/CAD futures, as the pair could test lower supports in the coming weeks. Recent data shows Canada’s core inflation has remained stubbornly sticky above 3%, and this raw materials print will only add to the Bank of Canada’s concerns.
On the equity front, the S&P/TSX 60 presents a more complex picture. Our large energy and materials sectors, which together account for over 30% of the index, should benefit from the high commodity prices reflected in this report. However, the threat of higher-for-longer interest rates will weigh heavily on rate-sensitive sectors like banks, utilities, and real estate, so we could see significant underperformance there.
