Canada's Inflation Jumps in April as Energy Prices Drive Headline Gains; Bank of Canada on Hold This Year, Says RBC

10:51 AM EDT, 05/19/2026 (MT Newswires) -- Canadian inflation accelerated sharply in April, though less than expected, driven primarily by higher gasoline prices and fading favorable energy base effects, said RBC after Tuesday's consumer price index.

Headline CPI rose 0.3% month-over-month seasonally adjusted in April, lifting the annual rate to 2.8% from 2.4% in March, below market expectations, according to the bank.

April marked the first month in a year that annual energy price growth was no longer being artificially dampened by the removal of the consumer carbon tax in April 2025, adding further upward pressure to headline readings, noted the bank.

The increase in headline inflation, however, continues to overstate underlying price pressures, stated RBC. Much of the strength in April reflected energy-related effects rather than a broad-based reacceleration in inflation across the basket.

Excluding food and energy, price growth remained considerably more contained, while core inflation measures were broadly stable and continued to point to easing underlying inflation momentum, pointed out the bank.

Measures of core inflation, including CPI-trim and CPI-median, averaged 2.1% year over year in April compared with 2.3% in March. That leaves core inflation running well below levels seen through much of last year and broadly consistent with gradually moderating domestic demand conditions.

Tuesday's CPI is consistent with RBC's broader view that higher oil prices will lift headline inflation and cut into household purchasing power but are unlikely to reignite systemic inflation pressures. While some categories, particularly food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labor market conditions.

Upside inflation risks could build the longer energy prices remain at elevated levels, but overall, the April data support RBC's base case that the Bank of Canada will remain on hold for the remainder of 2026.

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