TD Securities forecasts Canada’s April CPI at 3.1% year-on-year, up by 0.7 percentage points, with prices rising 0.6% month-on-month. The rise is linked to higher gasoline and other energy prices, plus base effects tied to the removal of carbon taxes in April 2025.
Higher oil and fertiliser costs are expected to keep upward pressure on food prices and airfares. Outside these two areas, broad price strength is not expected.
Core Inflation Outlook
Core inflation is projected to ease by 0.1 percentage points to 2.1%–2.2% for CPI-trim and CPI-median. At the same time, 3-month seasonally adjusted annualised rates are forecast to rise by 0.5 percentage points to 2.1%.
A 3.1% headline reading would place CPI above the Bank of Canada’s projections from the April Monetary Policy Report. The focus into the June policy decision is expected to remain on core inflation measures.
The article was produced using an AI tool and reviewed by an editor.
With the April CPI data release from Statistics Canada imminent, we are bracing for a jump in the headline inflation rate to 3.1%. This surge is largely driven by higher gasoline prices, as WTI crude has remained elevated above $85 a barrel, and a significant base effect from the carbon tax adjustments made back in April 2025. The figure will land noticeably above the Bank of Canada’s own projections, which will likely cause initial market chatter.
Trade Setup For June Decision
The critical detail for traders is the expected dip in core inflation measures to the 2.1-2.2% range. We anticipate the Bank of Canada will look through the temporary, energy-driven headline spike and focus on this underlying trend, a view supported by recent comments from the Governor on underlying price pressures. This suggests policymakers will maintain a dovish tilt heading into their June interest rate decision.
This creates an opportunity in the interest rate derivatives market. While the initial headline print could cause a brief spike in bond yields, positions that benefit from a steady or falling policy rate may become attractive in the days following the release. Overnight index swaps still imply a nearly 60% chance of a June cut, and this expectation should solidify if core CPI meets forecasts.
For currency traders, this sets up a potential “fade the rally” scenario in the Canadian dollar. An initial knee-jerk strengthening of the loonie on the 3.1% print could offer a favorable entry point to position for weakness as the market digests the dovish core reading. The divergence between headline and core figures suggests buying short-term volatility through options on USD/CAD could also be a prudent strategy to capture the expected price swing.
