TD Securities expects Canada’s April CPI to firm to 3.1% year-on-year, driven by higher energy prices and base effects from the removal of carbon taxes. Core inflation is forecast to edge slightly lower, and while headline CPI would run above Bank of Canada projections, TD anticipates policymakers will focus on core measures into the June decision.

Energy and base effects lift CPI

"We look for CPI inflation to firm by 0.7pp to 3.1% y/y in April as prices rise by 0.6% m/m, in line with the market consensus, underpinned by another sharp increase for gasoline and other energy products as base effects from eliminating carbon taxes in April 2025 add to the acceleration on a year-ago basis."

"Higher oil/fertilizer prices will also keep upward pressure on food and airfares, but we do not expect broad strength outside these two components."

"Core inflation is forecast to edge lower by 0.1pp to 2.1/2.2% for CPI-trim/median as 3m (saar) rates accelerate 0.5pp to 2.1%."

"Our forecast for 3.1% y/y would leave headline CPI tracking well above BoC projections from the April MPR, but we expect the BoC to look through this and remain focused on core inflation heading into the June policy decision."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)