BMO on The Day, Week Ahead in Canada

07:46 AM EDT, 04/20/2026 (MT Newswires) -- The Canadian consumer price index report for March is the key release at 8:30 a.m. ET on Monday and it's going to show much higher headline inflation, said Bank of Montreal (BMO).

The bank noted that oil prices surged as conflict broke out in the Middle East, driving gasoline prices sharply higher, which alone will drive inflation up about 0.7 percentage point in March. While energy prices appear to have peaked, April still might see higher prices on average, especially as the federal excise tax cut doesn't come into effect this Monday.

Heating oil also saw a second consecutive big monthly increase, pointed out BMO. Air fares are expected to contribute to the "chunky" headline increase as well.

The bank's call for a 1.1% month-over-mont rise would be among the larger monthly moves on record and lift the yearly rate to 2.6%. Unfortunately, with last year's carbon tax cut falling out of the calculation next month, inflation will have a three-handle in short order.

Core inflation (CPI Trim & Median) is expected to be flat to up a tick, potentially ending a five-month stretch of disinflation, calculated BMO. A soft underlying economy continues to put downward pressure on domestic prices, but base effects are a bit tougher this month. Barring some surprisingly fast pass-through from energy prices, look for core inflation to resume the decelerating trend in April.

Other core measures look to accelerate in March as well, with CPIX, which excludes taxes, moving to 2.7% year over year and CPI excluding food and energy (includes taxes) rising to 2.1% year over year. The outlook for inflation remains highly uncertain amid oil price volatility and unknowns on the fate of trade/tariffs.

The Bank of Canada's Business Outlook Survey (BOS) for Q1 is out at 11:30 a.m. on Monday, and is a key input into policy decision-making, according to BMO. This version was likely compiled through February, though some follow-up questions may have been conducted in March after the Iran war broke out.

The bank said that, before the war, economic activity appeared resilient, although with some weather-related distortions at the start of the year. Tariffs remained the key source of uncertainty, as the United States Supreme Court's striking down of IEEPA duties had little effect on Canada, thanks to the USMCA trade deal exemptions. Overall, BMO expects the BOS indicator could tick up modestly but remain in negative territory given still-significant geopolitical uncertainty.

Even as the economy broadly continues to grow below potential, there are some sectors that stand out, such as resources -- especially energy -- defense, and Artificial Intelligence infrastructure. They are supported by a combination of low -- or non-existent -- tariffs and domestic policy priorities, and BMO predicts the Iran war will reinforce these sectoral differences. Expectations of sales growth and investment intentions will likely diverge along those lines.

Any signs of export diversification could be an early signal that those measures are starting to bear fruit, adding to economic resilience.

As such, the bank looks for capacity pressures to remain muted, though survey responses will also likely vary by sector. Indicators of hiring activity and wage growth expectations will likely be subdued given the ongoing softness in the labor market.

Inflation expectations will be highly sensitive to the timing of the survey. Before the war, measures of inflation were increasingly well-behaved, with some metrics consistently below target. Policymakers are keenly interested in seeing how expectations will react to the oil price shock. However, it's likely too soon to reach a definitive conclusion from this survey, it added.

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