Consumer prices rose at an annual rate of 2.3 per cent in March, mainly because of higher gasoline prices, Statistics Canada said Thursday.

The increase was slightly higher than the two per cent rise recorded in February.

Gasoline prices rose by 10 per cent nationally in the past year. But that masked big regional variations. Prices in Prince Edward Island surged 14.3 per cent and Ontario residents paid 12.8 per cent more, but in New Brunswick, pump prices were up by only 2.2 per cent.

   Provincial Inflation Rates
 Province March 2007 February 2007
 N.L.  2.0% 1.6%
 P.E.I.  2.7% 1.0%
 Nova Scotia  2.1% 1.9%
 New Brunswick  1.4% 0.9%
 Quebec  1.8% 1.4%
 Ontario  1.8% 1.6%
 Manitoba  2.6% 2.1%
 Saskatchewan  2.6% 1.9%
 Alberta  5.5% 4.9%
 B.C.  2.2% 2.2%
 Whitehorse  2.0% 1.3%
 Yellowknife  2.6% 1.8%
 Iqaluit  2.9% 2.7%

Prices for the basket of goods that Statistics Canada monitors rose 0.8 per cent in March from February, the most pronounced monthly increase in the consumer price index since September 2005, when Hurricane Katrina caused a 0.9 per cent jump.

Year-over-year, higher costs for new housing — up 6.9 per cent over the year — and higher interest rates on mortgages also contributed to the overall rise in March.

Fresh vegetables and restaurant meals were also up, Statistics Canada said.

But the drop in the price of natural gas limited the rise. Natural gas prices were 15.7 per cent lower in March, compared with March 2006.

Natural gas plunged 30.4 per cent in Ontario. Alberta, where gas is produced, was the only province not to record a drop. Prices there shot up 23.5 per cent in March, partly because of cold weather and partly because of a decrease in the supplies in storage.

Other prices with noteworthy year-over-year drops in March included video equipment, computer equipment and supplies and adults' clothing. However, women's clothing costs rose 4.4 per cent from February because of the introduction of the new spring lines.

The core rate of inflation, which excludes the most volatile items in the consumer basket, slipped from 2.4 per cent in February to an annual rate of 2.3 per cent in March.

Ninth month in row

It's the ninth month in a row that the core rate has exceeded the Bank of Canada's two per cent target.

The central bank will release its next interest rate decision on Tuesday. No change is expected. But some analysts say the Bank of Canada could change its outlook to be slightly less neutral.

"Core inflation remains too hot for the bank’s comfort, and the non-core elements continue to bubble along noisily, especially food and energy, adding to the upward pressure," said BMO Capital Markets economist Doug Porter.

"We suspect that next week’s [Monetary Policy Report] — which follows two days after the interest rate decision on Tuesday — could subtly shade the inflation risks as more important than growth concerns," he said.

Inflation highest in Alberta

Booming Alberta had the biggest across-the-board increase in March prices, with an annual gain of 5.5 per cent.

"Most of the increase came from costs for housing and for filling up the gas tank," Statistics Canada said.

Alberta's new house price index was up 34.3 per cent from a year earlier, although the rate of increase has been slowing since October.