Canada updates the consumer price index for March on Tuesday at 8:30 a.m. ET and a day before the Bank of Canada's decision, noted Scotiabank.

It's "highly doubtful" that CPI could sway the BoC call either way, said the bank. The BoC's forecasts and Monetary Policy Report will be set before the CPI release and they are unlikely to be overly reactionary to just one set of numbers.

Scotiabank has estimated a rise of 0.7% month over month on a seasonally unadjusted basis (NSA) as per the polling convention and 2.7% year over year from 2.6% the prior month.

Because March is normally an up-month for prices as new Spring and Summer lines get rolled out for seasonal merchandise, the 0.7% month-over-month NSA rise is estimated to mean a 0.3% month-over-month seasonally adjusted (SA) gain, pointed out the bank.

The rest of the pressure comes significantly from the expiration of the GST/HST cut on a modest portion of the CPI basket in mid-February. The way Statistics Canada captures this effect entails including half of it in February and the other 0.4% month over month half of the rise in total CPI the next month, added Scotiabank.

Gasoline prices were slightly weaker in March over February in NSA terms and this could be about a -0.1% m/m NSA weighted drag on total CPI, added the bank.

A further upside risk is what happens to SA factors. They may overstate the rise of SA prices because of the recency bias in how SA factors are calculated. By emphasizing seasonal patterns in more recent years more heavily than history, recent months of March have seen relatively high SA factors.

Key, however, will be whether the mentioned trend persistence in the BoC's preferred core gauges continues. It's virtually impossible to forecast these measures that are so sensitive to small movements in the dozens of price subcomponents that are included in the basket, absent credible price information beforehand, according to Scotiabank. However, as the GST/HST cut fully shook out of prices, it's possible that some relief in core prices could arise if retailers seek to offset some of the tax-induced price spike. These core measures exclude the direct effects of tax changes, but it's the indirect effects that may be uncertain.