According to TD Securities’ Senior Canada Economist Robert Both, Canadian Consumer Price Index (CPI) inflation is projected to increase to 3.1% year-on-year in April, primarily due to higher energy and food prices as well as base effects from last year’s carbon tax changes [1]. The monthly CPI is expected to rise by 0.6%, with a significant contribution from gasoline and other energy products [1]. Both notes that higher oil and fertilizer prices are also exerting upward pressure on food and airfares, but does not anticipate broad-based strength outside these components [1].
Despite the anticipated headline CPI overshoot, core inflation measures (CPI-trim and CPI-median) are forecast to edge lower by 0.1 percentage points to a range of 2.1–2.2% year-on-year, with three-month seasonally adjusted annual rates accelerating by 0.5 percentage points to 2.1% [1]. The Bank of Canada (BoC) is expected to focus on these core measures rather than the temporary rise in headline inflation when making its June policy decision [1].
Both highlights that the forecasted 3.1% year-on-year headline CPI would be well above the BoC’s projections from the April Monetary Policy Report (MPR), but he expects the central bank to look through this temporary overshoot and remain attentive to underlying inflation trends [1]. The BoC’s preferred core measures are anticipated to slow to 2.1% year-on-year due to a large base effect from 2025 [1].
CONCLUSION
Canada's April CPI is expected to rise sharply due to energy and food prices, but underlying core inflation remains subdued. The Bank of Canada is likely to prioritize core inflation measures over the temporary headline increase when considering its June policy decision.