Canada Inflation Rises to 2.8% While Core Measures Ease

A driver refuels at a Shell gas station in Vancouver on May 4. Photo by Isabella Falsetti /Photographer: Isabella Falsetti/

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(Bloomberg) — Higher energy prices drove up Canada’s inflation rate to 2.8% in April, reaching its highest level in nearly two years but coming in lower than economists had expected as core measures cooled.

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The conflict in the Middle East continued to push up gasoline prices last month, which rose by 28.6% from a year ago, Statistics Canada reported Tuesday. A base-year effect due to the removal of the consumer carbon levy in April 2025 also contributed to higher year-over-year price growth. 

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Excluding gasoline, the consumer price index rose by 2%. 

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While price growth reached its fastest pace since May 2024 and ticked up from 2.4% in March, it was still lower than the 3.1% rate economists surveyed by Bloomberg were expecting. The consumer price index on a monthly basis increased by 0.4%, also lower than the 0.7% projected by economists.

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The loonie dropped versus the US dollar after the release, falling about 0.2% to C$1.3766 as of 8:55 a.m. in Ottawa. Policy-sensitive Canadian bonds rallied, with the two-year yield down about four basis points to 3.03%.

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Headline inflation was “a bit softer than expected while core measures also eased,” said Shaun Osborne, chief currency strategist at Bank of Nova Scotia. “The Bank of Canada can be patient.”

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Core measure of inflation, which strip out volatility in price movements, suggest that pressures have softened outside of energy.

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The Bank of Canada’s preferred core gauges decelerated last month, with the average of the trim and median metrics at 2.05%, the lowest it’s been since January 2021. 

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Inflation excluding food and energy also fell to 1.5%, the lowest level since March 2021. 

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The central bank has opted to look through the short-term impact of higher energy prices on inflation, choosing to hold its key policy rate steady at 2.25%. 

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However, Governor Tiff Macklem has noted that heightened uncertainty both in the Middle East and on the US trade front mean that the central bank may need to adjust its policy rate in either direction.

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“The report will give comfort to the bank that we are yet to see higher energy costs feeding more broadly into CPI,” Charles St-Arnaud, chief economist at Servus Credit Union, said in an email. 

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“However, the longer gasoline prices stay elevated the more likely some of it will pass through to other prices. Nevertheless, we continue to believe that the Bank of Canada is likely on hold for the rest of the year.”

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While higher prices at the pump are squeezing Canadian households, pressures cooled elsewhere last month. 

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Rent, which was a major pain point after the Covid-19 pandemic as surging population growth bid up prices, slowed to 3.6% in April. That’s the lowest level since January 2022, when it was 3.1%.

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Cumulatively, however, rent prices have risen by 30.8% relative to April 2021.