RBC, BMO, and TD economists say May's 3.2% CPI is an energy story, not a Bank of Canada concern
Three of Canada's most closely watched bank economics teams are reading May's higher-than-expected inflation print as an energy-driven headline event rather than a sign of broadening price pressure, and none see it as sufficient to move the Bank of Canada (BoC) at its July 15 rate decision.
Canada's consumer price index (CPI) climbed to 3.2% year over year in May 2026, its highest reading since December 2023. It's driven primarily by gasoline prices, which rose 33.2% year over year as the continued closure of the Strait of Hormuz kept global oil supply constrained.
Food inflation picked up to 3.8% annually from 3.5% in April.
The core reading that matters most
Despite the headline surge, the BoC's two preferred core measures, trim and median, averaged 2.1% in May, unchanged from April.
CPI excluding food and energy edged only slightly higher to 1.6% year over year, keeping broader price pressure well inside the central bank's target range.
Abbey Xu, an economist at RBC Economics, concluded in her May 2026 analysis that "the May report suggests headline inflation remains heavily influenced by energy prices while underlying inflation trends continue to move broadly in line with the Bank of Canada's inflation target."
Xu also pointed to demand-side constraints, noting that "a weak economy and still-elevated labour market slack are limiting businesses' ability to pass higher costs on to consumers."
At TD Economics, senior economist Leslie Preston was direct on the forward outlook: "We expect May to mark the peak for headline inflation this year," citing the oil price pullback that followed a tentative Iran–US ceasefire.
Douglas Porter, chief economist at BMO Capital Markets, described the result as "a mild disappointment overall," but noted that "core remains essentially right on target, and the recent big pullback in oil prices — if sustained — will deliver some important relief on headline readings in coming months."
He added that "the persistence of food inflation is a significant thorn."
Marc Ercolao of TD Economics explains how the US-Iran ceasefire could ease inflation pressures in Canada while highlighting the risks that could still affect the Bank of Canada’s rate decisions.https://t.co/hv4mcHWQS4
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 16, 2026
What the July 15 decision means for mortgage professionals
All three economists are pointing to a continued hold at the BoC's July 15 announcement which will be accompanied by a new Monetary Policy Report, making it the most consequential monetary policy moment for Canadian mortgage professionals this summer.
Following the BoC's fifth consecutive hold at 2.25% on June 10, TD Economics' Andrew Hencic said that "given the competing forces on inflation, we expect the Bank of Canada to stay on hold through the balance of the year."
RBC's June 2026 quarterly economic outlook for Canada's mortgage market reinforces that variable rates are likely to remain where they are through the rest of the year.
Leah Zlatkin, a licensed mortgage broker at LowestRates.ca, told Canadian Mortgage Professional earlier this year that "there's no clear signal that rates are heading materially lower, and in some cases we're already seeing lenders adjust pricing upward." May's data does nothing to change that picture.
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