DLCG's chief economist argues April's CPI jump is war-driven noise and the next rate decision should reflect that
The Bank of Canada is likely finished moving rates for the rest of 2026 and April's inflation data support that view, according to Dr. Sherry Cooper, chief economist at Dominion Lending Centres Group (DLCG).
Despite headline inflation climbing to 2.8% last month, Cooper's analysis of Statistics Canada's Consumer Price Index (CPI) release lands on a clear conclusion: the energy shock fuelled by Middle East conflict will not reignite systemic price pressure, and the central bank has little reason to act at its next decision.
That framing matters for mortgage professionals. With the Bank of Canada's overnight rate parked at 2.25% and a renewal wave reshaping broker workloads across the country, the question of when or whether rates move again is one clients are asking at every appointment.
Cooper's read is that the answer, for now, is not soon.
Headline inflation rose to 2.8% in April from 2.4% in March, coming in below the market consensus of 3.1%.
The acceleration was almost entirely a gasoline story. Prices at the pump surged 28.6% year over year, up from 5.9% in March, as the removal of the consumer carbon levy in April 2025 dropped out of the 12-month comparison window.
The Strait of Hormuz disruption added supply uncertainty, and the seasonal switch to summer-blend fuel pushed costs higher still.
A temporary federal fuel excise tax suspension that took effect on April 20 provided some offset.
Fuel oil and other fuels climbed 41.3%, while natural gas, though still in annual decline, narrowed its fall to just 2.4% from 18.1% the prior month.
Core inflation is the number that matters
Beneath the headline, Cooper's analysis points to a notably different picture. The Bank of Canada's preferred core gauges — CPI-trim and CPI-median — both decelerated in April, falling to 2.0% and 2.1% respectively, for a combined average of 2.05%. That is the softest core reading since January 2021.
Inflation excluding food and energy fell to 1.5%, its lowest level since March 2021.
"Today's report is consistent with our view that higher gasoline prices will lift headline inflation and reduce household purchasing power. Still, these war-related pressures are unlikely to reignite systemic inflation pressures," Cooper said.
"While some categories, especially food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labour market conditions."
She added that war-related pressures are unlikely to reignite systemic inflation, and that the longer the Strait of Hormuz remains closed, the longer energy prices will stay elevated, but that this dynamic alone does not change the Bank's calculus.
"The April data support our base case that the Bank of Canada will remain on the sidelines for the rest of 2026. The Bank will continue to monitor price data carefully, promising rate hikes if inflation ticks up and appears entrenched," she concluded.
Read more: Don’t expect a BoC rate cut in 2026 – and maybe not 2027, either
Meanwhile, the Bank's own deliberations have acknowledged that "members agreed that they had scope to be patient for now, but the situation could change quickly, and monetary policy might need to respond to guard against the risk that inflation broadens and becomes more persistent."
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