Canada’s CPI inflation is forecast to rise to 3.1% year-on-year in April. Monthly CPI is expected to increase by 0.6%, mainly due to higher gasoline and other energy prices.
The rise is also linked to base effects from last year’s carbon tax changes. Energy is expected to drive most of the month’s strength, with limited price rises outside energy and food.
Higher oil and fertiliser prices are expected to add upward pressure on food prices and airfares. Core inflation measures, CPI-trim and CPI-median, are projected near 2.1–2.2% year-on-year.
CPI-trim/median are forecast to edge lower by 0.1 percentage points to 2.1–2.2%. CPI-trim/median are expected to rise by 0.2% month-on-month (0.23% unrounded).
Three-month seasonally adjusted annualised rates are expected to rise by 0.5 percentage points to 2.1%. Headline CPI at 3.1% would be above the Bank of Canada’s April MPR projection, ahead of the June policy decision.
We are forecasting Canadian headline inflation for April to jump to 3.1% year-over-year. This increase is mainly from a surge in energy prices and food costs. A key factor is also a base effect related to the carbon tax changes from April of last year, 2025.
Recent market data supports this view, as WTI crude oil prices averaged over $90 per barrel in April 2026, which was a 15% increase from the month before. This directly translated to higher prices at the pump across Canada, with Statistics Canada’s own weekly gasoline data showing a sharp uptick. This energy shock is the primary driver of the expected headline number.
However, the Bank of Canada is likely to look past this temporary spike. We expect the Bank’s preferred core inflation measures, CPI-trim and median, to remain much more stable, landing near 2.1%. This suggests the underlying price pressure in the economy is not accelerating, which is what the BoC is focused on for its June policy decision.
We saw a similar pattern in 2025 when the Bank held its policy rate steady despite volatile swings in headline CPI, emphasizing its focus on the underlying trend. As of today, the market, looking at Overnight Index Swaps, is pricing in a small but not insignificant chance of a hawkish response from the BoC. This creates a potential opportunity if the Bank behaves as we expect.
For derivatives traders, this means any knee-jerk market reaction that prices in higher odds of a rate hike on the back of a hot 3.1% headline number could be an opportunity to fade. A spike in front-end bond yields or the Canadian dollar could be short-lived once the market digests the soft core inflation data. We should therefore watch for signs of an overreaction immediately following the CPI release.
The key detail to remember is the statistical quirk from last year, when the April 2025 inflation reading was artificially lowered by a one-time tax adjustment. The Bank of Canada will not be surprised by this year-over-year jump and will instead focus on the modest monthly gains in the core components. This reinforces the idea that their current policy path will remain unchanged in June.
