Canada's Price Pressure Look "Unusually" Muted in April, Says Desjardins

10:03 AM EDT, 05/19/2026 (MT Newswires) -- Headline prices rose just 0.4%, well below the 0.7% consensus forecast. That left the annual rate of inflation tracking 2.8%, still within the Bank of Canada's 1% to 3% target range. Higher gasoline prices drove the majority of the increase in April. In contrast, food prices were flat.

After declining 0.1% in March, prices excluding food and energy were unchanged in April. That traditional measure of core inflation is now running at just 1.5% year-over-year, with the three-month annualized rate even lower at 0.3%. At just 1.8%, the average of the three-month annualized rates of the Bank of Canada's core median and trimmed mean metrics was also very tame. A sharp decline in travel tours and further reductions in cell phone services prices, combined with soft prints in large categories such as food and rent, dulled overall price pressures.

The breadth of Canadian outsized price increases narrowed in April, with the share of consumer price index components rising faster than 3% year over year falling to 38% from 41%, said Desjardis after Tuesday's CPI.

While that's still slightly elevated, recent price dynamics suggest that metric should continue trending lower in the months to come, noted the bank.

The soft inflation print gives the Bank of Canada ample scope to remain patient in assessing the fallout from higher oil prices, stated Desjardins. With the economy operating with slack, higher gasoline prices may cannibalize spending in other areas, thereby keeping underlying price pressures contained.

As a result, the bank continues to expect that the BoC will stay on the sidelines for the remainder of this year.

While United States Treasury yields are higher again on Tuesday, Government of Canada (GoC) yields at the short end of the curve have declined, added Desjardins.

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