CIBC Private Wealth
May 21, 2025
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Statistics Canada released Canada’s inflation report yesterday. The data showed that inflationary pressures eased in April, benefiting from the end of consumer carbon prices. While the drop in headline inflation was encouraging news for Canadian households and businesses, the news wasn’t all positive as core inflationary pressures picked up in April. This leaves the Bank of Canada (BoC) in a difficult position, with inflationary pressures remaining elevated but economic activity slowing. Here’s a look at April’s inflation report.
- The annual inflation rate in Canada moderated to 1.7% in April from 2.3% in the previous month. This was just above the 1.6% rate economists had expected, based on a Bloomberg survey. This marked the slowest pace of inflation since September 2024.
- Energy prices declined by 1.7% year-over-year in April. Gasoline prices alone fell by 18.1% as consumer carbon prices came to an end. Oil prices dropped almost 20% in April, helping to push energy prices lower.
- Conversely, the growth in grocery prices accelerated in April compared to March. Costs for home operations increased, while shelter price growth slowed.
- The end of consumer carbon prices helped push down inflation in April, which provided some relief for Canadians. However, this impact was expected, leaving markets to anticipate higher inflation in the months to come.
- The inflation report came with its share of challenges. The two key core inflation rates tracked by the BoC increased in April to over 3%.
The BoC makes its next interest-rate announcement on June 4. The BoC said it will closely monitor how tariffs are impacting the Canadian economy and prices. Currently, markets are expecting the BoC to lower interest rates again. But the BoC is walking a fine line as it weighs stabilizing prices with slower economic growth and a softening labour market.
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