Inflation Climbs Again in April, But Bank of Canada Can Afford to Wait, says National Bank

09:28 AM EDT, 05/20/2026 (MT Newswires) -- Canadian inflation edged higher again in April, as the annual increase in prices climbed from 2.4% in March to 2.8%, but the increase was well below economists' consensus forecast of 3.1%, noted National Bank of Canada.

In terms of the impact of the data for rates, National Bank has argued since inflation in Canada was already well under control before the recent oil shock the Bank of Canada should look through the rise in energy prices and leave the key benchmark unchanged. Tuesday's consumer price index report reinforces that view, it said.

Core inflation remains contained, pointing to an economy still operating with excess supply, and it also reflects the continued easing in shelter costs, the bank added.

"Indeed," National Bank noted, "a declining population combined with higher interest rates has triggered a correction in housing prices, particularly in the country's least affordable markets. With vacancy rates increasing amid recent demographic trends, rent prices have been the biggest driver of this slowdown."

"In this context, and given that the labor market registered its worst start of the year since 2009 (excluding the COVID-19 pandemic), we believe that the risk of second-round effects (wage-push inflation) from the surge in energy prices is limited."

It's true that the Middle East conflict is still not resolved, and energy prices are on track to rise again in May, meaning that annual inflation has likely not peaked yet, said National Bank. But interest rates already appear far from accommodative in an environment characterized by geopolitical uncertainty and ongoing trade tensions with the United States, it added.

Overall, current conditions argue for a patient approach from the BoC, according to the bank.

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