TD Securities strategists anticipate that the Bank of Canada’s (BoC) April Monetary Policy Report (MPR) will significantly increase its oil price assumptions, with Brent crude projected at USD 90 and West Texas Intermediate (WTI) at USD 85. This marks a substantial rise from the previous baseline of USD 55 for WTI, reflecting the average price since January 28th. TD Securities' own baseline expects WTI to reach USD 92 in Q2 and settle at USD 85 by year-end, slightly above the BoC's anticipated assumptions [1].
The strategists forecast that these higher oil price assumptions will lead to a sharp acceleration in the BoC's inflation forecasts. Specifically, headline Consumer Price Index (CPI) is expected to peak just below 3% in Q2 2026 before gradually declining to 2% by the end of 2027. Core inflation measures are also expected to see more modest upward revisions. The report notes that the growth impact of higher oil prices may be discussed in greater detail in a dedicated section of the April MPR [1].
TD Securities maintains the view that higher oil prices are ultimately beneficial to Canadian economic activity, despite the temporary inflationary pressures. The strategists suggest that the BoC's updated forecasts will reflect these dynamics, with inflation returning to target levels over the medium term [1].
CONCLUSION
TD Securities expects the Bank of Canada to raise its oil price assumptions in the April MPR, resulting in a temporary rise in inflation forecasts. Despite the short-term inflationary impact, higher oil prices are seen as supportive of Canadian economic growth, with inflation projected to return to target by the end of 2027.