EconoFACTS

April 20, 2026 | 09:06

Canadian CPI — Not Great, But Less Bad than Feared

Economist

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Canadian consumer prices popped 0.9% in March, lifting the headline inflation rate to 2.4% from 1.8% the prior month. The jump was no surprise, with gasoline prices surging by a record 21.2% in the month (records dating back to 1949). Other than that, Mrs. Lincoln thought the play was just fine, as core was milder than expected, helping hold the overall inflation rate a bit below consensus expectations (we and others had it pegged closer to 2.6% for March). The Bank of Canada's two main measures of core stayed calm, with median holding steady at 2.3% y/y, and trim easing a tick to 2.2%, a five-year low. The older, more traditional, measures of core—excluding food & energy—are still hovering right around the 2% target. The shorter-term metrics are all at that pace or even well below (see 3-month trends in table), while the breadth of core inflation moderated notably as well.

On the strong side of the ledger last month, the details were quite lopsided, with all five of the big gainers driven by the oil shock—gasoline, travel tours, air fares, fuel oil, and fuel for RVs. Meantime, the big drags last month were quite diverse, indicating that the underlying story for the economy is softness. To wit, telephone services, auto insurance, furniture, candy, and mortgage interest costs all posted declines last month, and all very different items. Having said that, two of the pain points for consumers were not great, as grocery prices picked up a bit again to 4.4% y/y (from 4.1%)—fresh veggies were the issue there—while rent also ticked up to 4.2% (from 3.9%).

Looking ahead to next month's report, it already has two strikes working against it, and heading for a higher headline inflation rate. First, base effects were poised to seriously lift it in any event, as the consumer carbon tax was removed a year ago (on April 1, 2025). Second, even with some pullback recently, and the federal gas tax cut (effective today), gasoline prices are still poised to rise about 7% from March's average level. Together, this is still expected to lift overall inflation a bit above 3% next month. However, depending on where oil prices go and how long the Strait remains closed, it's possible that April will mark the high-water point for inflation this year (with heavy, heavy emphasis on "possible").

Bottom Line: It could have been worse. Much as other major economies posted a significant pop in headline inflation, the record rise in gasoline prices lifted Canada's inflation rate significantly last month. However, the picture for underlying inflation was a bit better than expected, and continues the recent pattern of steadily moderating core inflation trends. Our considered view is that if it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of BoC rate cuts, not hikes. This report reinforces that opinion.

Table 1 - Canada — CPI

(month/month % change)

Source: BMO Economics, Haver Analytics