Canada: Energy-driven CPI rise supports BoC hold – RBC
Royal Bank of Canada (RBC) economist Abbey Xu notes that Canadian inflation accelerated in April, mainly due to higher energy prices and fading base effects, while underlying pressures stayed contained. Core measures such as CPI-trim and CPI-median eased, and broader price pressures are moderating. Xu concludes that higher Oil prices will not reignite systemic inflation and expects the Bank of Canada (BoC) to stay on hold through 2026.
Energy lifts headline, core stays contained
"The increase in headline inflation, however, continues to overstate underlying price pressures."
"Measures of core inflation, including CPI-trim and CPI-median, averaged 2.1% year-over-year in April compared with 2.3% in March."
"The report is consistent with our 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 labour market conditions."
"Upside inflation risks could build the longer energy prices remain at elevated levels, but overall the April data support our base case that the Bank of Canada will remain on hold for the remainder of 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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