RBC Economics flags a sharp jump in April CPI as energy costs bite, but sees no broad-based price resurgence ahead
Canada's headline inflation rate is expected to surge in April, driven by a dramatic rise in gasoline prices tied to the ongoing conflict in the Middle East — but economists at Royal Bank of Canada are cautioning that the spike is unlikely to signal a broader return of systemic price pressures.
In a monthly forecast update, RBC Economics' Abbey Xu and Annie Zheng project that elevated oil prices are not expected to reignite broad-based inflation in Canada this year, noting that global supply chains are more resilient than during past energy shocks, domestic demand has softened, and the commodity disruption remains narrowly concentrated in oil.
The headline consumer price index is forecast to jump to 3.1% year-over-year in April, up from 2.4% in March.
The acceleration reflects a confluence of factors, including a statistical distortion: this April is the first month in a year that the annual energy comparison will not be suppressed by the removal of the federal consumer carbon tax in April 2025.
At the same time, gasoline prices climbed another 8% in April following a 21% surge in March and were running approximately 28% above year-ago levels.
The partial removal of the 10-cent-per-litre federal fuel excise tax — which came into effect on April 20 — will provide only a modest offset, with its full effect expected to show up more clearly from May onwards.
Even accounting for that relief, after-tax gasoline prices in May are still running more than 30% above the same period a year ago.
Wesley Cowan of Canadian Association of Insolvency and Restructuring Professionals arns more households are reaching a financial breaking point as debt pressures intensify.https://t.co/6yMt93KQ8J
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 12, 2026
Will broader inflation pressures reignite?
Beyond fuel, the picture is more reassuring. Food price growth is expected to remain around 4% in April, broadly consistent with recent trends.
The Bank of Canada's preferred core inflation measures — CPI-median and CPI-trim — are expected to tick slightly lower on a year-over-year basis, as a large monthly increase from a year ago drops out of the annual calculation.
RBC economists note that central banks will need to keep a close eye on inflation expectations as high oil prices persist, but that they won't rush to respond to the energy supply shock, maintaining a forecast for rates to hold through the end of the year.
Business surveys show short-term inflation expectations have risen alongside energy price spikes, but longer-term expectations remain anchored around the Bank's 2% target, giving the Bank room to treat the near-term volatility as transitory rather than structural. RBC
This is a meaningfully different backdrop from the inflation surge of 2022, Xu and Zheng argue, and mortgage professionals would do well to take note of that distinction when setting client expectations.
The unemployment rate sits at 6.9%, reflecting a soft labour market that constrains the kind of wage-price spiral that made previous inflation episodes so persistent.
BMO Economics' Douglas Porter similarly argued that a rate hike this year remains highly unlikely, with the economy struggling to grow and core inflation moving closer to the 2% target, even as geopolitical risks cloud the outlook.
What this means for mortgage clients
Consumer spending, meanwhile, has shown more resilience than the headline macro numbers might suggest.
Building on a 0.6% increase in retail sales in February, Statistics Canada's advance estimate points to retail sales rising a further 0.6% in March.
RBC cardholder transaction data indicates that household spending held up into the first quarter of 2026, even as the oil shock weighed on broader confidence.
The key risk, Xu and Zheng note, is the duration of the oil shock. If elevated oil prices become more persistent and broad-based expectations shift, the Bank will need to reassess. But for now, the base case remains a hold through 2026.
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