Softer April CPI in Canada Likely Reflects Slack in Economy, Says CIBC

08:59 AM EDT, 05/19/2026 (MT Newswires) -- Canadian headline consumer price index accelerated in April as gasoline prices surged, but the jump wasn't as high as expected and core measures of inflation remained muted, supporting the current wait-and-see stance of the Bank of Canada, said CIBC.

The 0.4% month-over-month non-seasonally adjusted increase was three ticks below the consensus forecast, noted the bank after Tuesday's data. While the annual rate accelerated to 2.8%, it didn't breach the 3% mark as expected consensus was 3.1%.

Higher energy prices, particularly gasoline, drove the headline acceleration, but price pressures were generally much tamer elsewhere, stated CIBC. Indeed, excluding gasoline, inflation actually decelerated to 2.0% year over year from 2.2% in March.

An average of four core inflation measures came in at only 0.1% in April, and the year-over-year prints for CPI-Trim and CPI-Median were both below consensus expectations. Shelter inflation was tame, while air fares and travel tour prices surprisingly fell on a year-over-year basis, it added.

Softer core measures of inflation relative to the pick-up seen in the United States is partly a timing issue, as air fares in Canada are included at the time a flight is taken and because of that fare increases seen recently will show up to a greater extent in CPI readings over the summer, according to the bank.

However, it is likely also a reflection of the slack that exists within the Canadian economy, placing downward pressure on inflation components that aren't greatly affected by oil prices or transportation costs more broadly, said the bank. Looking forward, the slack currently in the economy lessens the likelihood that the current oil price shock will broaden into wider inflation pressure, and CIBC continues to forecast that the Bank of Canada will hold its overnight rate at its current level this year.

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