Inflation Accelerates to 2.8% on Energy Surge — A Two-Year High

Canada’s headline inflation rate climbed to its highest level in two years in April, driven almost entirely by an energy shock tied to the ongoing Middle East conflict — but underlying price pressures remained more contained than feared.

Statistics Canada reported Tuesday that the Consumer Price Index increased 2.8% year over year in April, up from 2.4% in March, with prices rising 0.3% on a seasonally adjusted monthly basis. The jump was largely attributable to a confluence of factors at the pump: the removal of the consumer carbon levy on April 1, 2025 had caused a monthly price decline in that month, which put upward pressure on the year-over-year gasoline movement in April 2026. Supply uncertainty caused by the conflict in the Middle East, as well as the seasonal switch to the more expensive summer blend, added further upward pressure. Statistics CanadaStatistics Canada

The energy picture is stark: prices at the pump were up 28.6% year over year in April, and energy prices as a whole were 19.2% higher versus a year ago — the fastest pace since 2022. Beneath that headline, however, the picture is more stable. Inflation excluding gasoline rose a more modest 2.0% year over year. Food inflation actually cooled, falling to 3.5% from 4.0% in March, and overall services inflation declined further to 1.7%, down from 2.6% in March. The 2.8% print came in below the market consensus of 3.1%. TD + 2

The government has introduced a partial buffer: a temporary suspension of the federal fuel excise tax on gasoline, diesel, and aviation fuels took effect April 20, 2026, and is expected to reduce Canadians’ bills at the gas station by up to 10 cents per litre on regular gasoline and up to 4 cents on diesel. The suspension runs until September 7, 2026. Without that measure, the April CPI print would have been materially higher. Government of Canada

Why it matters: The April inflation report is the last data the Bank of Canada will study before its June 10 rate decision. The number is high enough to maintain the Bank’s caution, but low enough — and sufficiently energy-driven — that it does not, on its own, compel a rate hike. TD Economics noted that with the labour market still soft, the ability of firms to pass on cost increases from the inflation shock to consumers is more limited — a key factor underpinning the view that if the sharp rise in oil prices begins to reverse, the Bank of Canada will be able to stay on hold this year. Rent prices remain a persistent long-run concern: despite a recent slowdown nationally, rent prices have increased 30.8% from April 2021 to April 2026.