CPA Canada sees oil driven inflation but little reason for an emergency rate move
Canada’s latest bout of energy‑driven inflation left mortgage professionals scanning for signs of another rate surprise – and finding instead a central bank still inclined to wait.
Headline consumer prices ticked up to about 2.4% in March as gasoline costs jumped, but underlying pressures stayed contained and well within the Bank of Canada’s 1–3% target band.
Headline inflation rose but core eased
CPA Canada’s chief economist, David‑Alexandre Brassard, said the case for another hike remains weak.
“There is little in the latest data to suggest that the Bank of Canada needs to act preemptively on interest rates to constrain inflation,” he said.
“With core inflation continuing to ease and demand softening, the current policy rate seems restrictive.”
Brassard pointed to the recent conflict in Iran, which he said triggered a sharp spike in oil prices. They rose roughly 40% almost overnight and peaked at 66% above pre‑conflict levels, before later settling closer to 25% higher.
This fuelled March’s headline inflation print as energy costs filtered through to goods. “The backdrop of weaker demographics and sectoral tariffs continues to overshadow the impacts of the war in Iran on Canada,” he said.
Canada’s inflation is heating up again, driven by an energy surge.
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 20, 2026
Tiff Macklem of Bank of Canada signalled policymakers may look past short-term price spikes as CPI rose to 2.4% amid rising fuel costs.https://t.co/Wg7AbWYL1X
Meeanwhile, RBC Economics stressed that “oil prices must remain elevated for months rather than days or weeks to cascade through supply chains and influence business pricing decisions” – a key reason they expected only a modest, delayed inflation bump rather than a full‑blown surge.
Weaker jobs and housing kept pressure on borrowers
Brassard also highlighted a soft labour market and a fragile housing sector as key considerations for rate‑setters.
“As it weighs its next move, the Bank of Canada will be closely watching a still‑soft labour market and a struggling housing market,” he said.
“Employment remains down by about 100,000 jobs in 2026, and while wage growth is supporting consumption, financial pressures are building—mortgage delinquencies and insolvencies are rising and housing activity and prices remain weak.”
Brassard said higher oil costs could still seep into broader prices but in a more contained way than in past shocks.
“Looking ahead, higher oil prices may still pass through to goods and food prices, but the impact is expected to be more muted than in previous shocks, with gas prices still below 2022 and 2023 levels in real terms.”
Other economists see little case for rate hikes
Leslie Preston, managing director and senior economist at TD Economics, said the Bank of Canada is widely expected to leave its key rate at 2.25% at the upcoming decision, arguing that a “generally soft economic backdrop” should contain the pass‑through from higher oil into core prices.
Porter went further, suggesting that “if it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of BoC rate cuts, not hikes.”
CIBC economist Andrew Grantham also expects the central bank to “remain on the sidelines through 2026,” even as headline inflation temporarily pushed above 3% in April on gasoline and tax base effects.
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