Canada's April CPI Is "Unambiguously" Soft Excluding Gasoline, Calming BoC Rate-Hike Speculation, Says BMO

11:40 AM EDT, 05/19/2026 (MT Newswires) -- Canadian consumer prices rose 0.4% month over month non-seasonally adjusted in April, or 0.3% in seasonally adjusted terms, lifting the headline inflation rate to 2.8% year over year from 2.4% the prior month, said Bank of Montreal (BMO).

The bump was driven by an 8.9% jump in gasoline prices, which the bank saw coming a mile away.

However, the real story in Tuesday's CPI release was how all other prices would respond to the spike in energy costs, and the news there was much better than expected, stated BMO. Before digging into all the "messy" details, one only needs to know that CPI excluding gasoline was up precisely 2.0% from a year ago, so any high-side miss in inflation can be exclusively tied to what's going on at the pumps.

Looking beyond the nasty business at the gasoline pumps, this CPI report is "unambiguously" soft, according to the bank. It appears that the sizeable and growing output gap is prompting ongoing disinflationary pressure in many other sectors.

The risk is that still-rising energy prices disrupt that calming trend over the next few months.

However, near-term Bank of Canada (BoC) rate-hike speculation, which has ratcheted up in recent weeks, should calm on this friendly report, BMO pointed out. This cool core-inflation backdrop reinforces the bank's bias that rate hikes would be a big mistake in the current Canadian economic landscape.

Still, the reality is that as long as oil prices continue to grind higher, the rate-hike chatter will remain, said BMO.

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