Bank of Canada Likely to Look Past Energy-Led Inflation Surge, Says National Bank

12:11 PM EDT, 06/22/2026 (MT Newswires) -- Higher oil prices have lifted the top-line inflation number, but the underlying trend remains contained, reinforcing expectations that the Bank of Canada will stay on hold, National Bank of Canada Capital Markets said.

The consumer price index (CPI) rose to 3.2% year over year in May from April's 2.8%, said Statistics Canada on Monday.

May's CPI is the highest rate since September 2023, due to soaring gasoline prices, which rose 33% year over year as a result of the closure of the Strait of Hormuz, noted National Bank. However, excluding energy, prices accelerated to 2.1% annually from 1.8%, as the food basket posted a price rise of about 4.3%, well above the overall basket.

"Despite the fact that inflation came in higher than expected in May, we are not overly concerned about the inflation situation in Canada," National Bank economists Matthieu Arseneau and Alexandra Ducharme wrote.

Stripping out food and energy, inflation remained well contained at 1.6% year over year in May, compared with 1.5% a month earlier, the two economists added, emphasizing that core inflation remains "generally contained".

Energy-driven inflation is unlikely to spread significantly across the economy, especially as oil market concerns ease. With trade frictions with the United States and geopolitical uncertainties persisting, there is little indication that interest rates are too low, according to National Bank.

"Overall, current conditions continue to support a patient approach from the Bank of Canada," the pair wrote.

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