Canada's annual inflation rate climbed in April, its highest in nearly two years
Canada's annual inflation rate surged to 2.8% in April, the fastest pace of price growth since May 2024.
War-driven energy costs delivered a jolt to the consumer price index, framing the Bank of Canada's June 10 rate decision as the most consequential of the year.
Statistics Canada reported Tuesday that inflation has moved up due to higher oil prices linked to the war in the Middle East.
Gasoline prices rose 28.6% year-over-year last month, the principal force pushing the April CPI reading from March's 2.4% to its current level.
The conflict in Iran, which began on February 28 and disrupted global crude oil shipments, has sent prices climbing at the pump since March.
April also marked the seasonal shift to pricier summer fuel blends.
Compounding the base-year comparison, Ottawa's removal of the consumer carbon levy in April 2025, which had suppressed fuel costs a year earlier, has now fallen out of the 12-month window, pushing annual comparisons higher rather than dampening them.
Excluding gasoline entirely, Statistics Canada noted that the consumer price index rose by a more modest 2.0% year-over-year in April, a figure that will provide some comfort to the Bank's Governing Council as it weighs its options ahead of the June announcement.
Energy prices as a whole were 19.2% higher compared with a year ago, the fastest pace since 2022, driven by transportation costs that climbed 7.6% in April — their highest since November 2022.
On a monthly basis, the CPI rose 0.4%, below economist forecasts of 0.7%.
Energy drives the headline, but core tells a different story
For mortgage professionals, the more closely watched numbers are the Bank of Canada's preferred core inflation gauges, and here the April data offered a more benign reading.
The average of the trim and median metrics came in at 2.05% — the lowest since January 2021 — as the central bank's deliberate strategy of looking past short-term energy volatility appeared, for now, to be vindicated.
CPI-trim fell to 2.0% in April from 2.2% in March, hitting target for the first time in more than five years, while CPI-median eased to 2.1% from 2.3%. TD
Inflation excluding food, energy and indirect taxes slipped to 1.5%, also its lowest since March 2021. In the words of BMO Economics chief economist Douglas Porter, that reading suggests that "if it weren't for those bothersome items like filling up your car and paying for groceries, there would be almost no inflation."
Outside of energy, several inflation categories softened in April. Food price growth eased to 3.5% from 4.0% in March, with grocery items including chicken, fresh vegetables, coffee and tea all seeing slower price increases.
Rent inflation pulled back to 3.6% — its lowest since January 2022 — with particularly sharp easing in British Columbia, the only province where headline inflation did not accelerate in the month.
Mortgage interest costs have also become a source of disinflation, falling 0.1% year-over-year, the first annual decline since mid-2022.
Prime minister Mark Carney's government announced a five-month relief measure on gasoline excise duty of 10 cents per litre, which helped moderate April's monthly increase.
However, analysts noted that with crude oil prices remaining elevated — West Texas Intermediate hovering near the $100-per-barrel mark — the relief may provide limited relief to borrowers facing higher energy bills alongside the upcoming mortgage renewal wave.
What it means for the June 10 decision
April's CPI report is the last major inflation data the Bank of Canada will see before its June 10 announcement, which mortgage professionals across Canada are watching closely.
The central bank has held its policy rate at 2.25% at each of its four decisions this year, and most economists expect that pattern to hold.
Leslie Preston, managing director and senior economist at TD Economics, noted that higher energy costs have not yet filtered through to core inflation.
"Core inflation cooled in April," Preston said. "There is little argument yet for Bank of Canada rate hikes here."
TD Economics expects the Bank to keep its policy rate at 2.25% for the duration of 2026.
Scotiabank's chief currency strategist Shaun Osborne was similarly measured in his reading of the April data, saying headline inflation was "a bit softer than expected while core measures also eased," and concluding that "the Bank of Canada can be patient."
The Bank's own minutes from the April 29 decision noted 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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