By Promit Mukherjee
OTTAWA, May 19 (Reuters) – Canada’s annual inflation rate accelerated to 2.8% in April from 2.4% in March, driven largely by a surge in gasoline prices after the Iran war pushed global crude oil prices sharply higher, data showed on Tuesday.
This marks the first time in almost two years that the annual consumer price index reading hit 2.8% underscoring how the war in Iran, that started on February 28, was quickly trickling down through the economy.
However, the inflation reading was below analysts’ expectations as prices of travel and tours, some accommodation expenses and furniture dropped in April on an annual basis.
Analysts polled by Reuters had forecast the annual inflation rate at 3.1% and the monthly inflation rate at 0.7%. On a monthly basis inflation was at 0.7% in April, Statistics Canada said.
– The removal of the consumer carbon levy in April 2025, which resulted in monthly declines for gasoline and natural gas, has now fallen out of the 12-month period, which also put upward pressure on the all-items in the CPI basket, StatsCan said.
– Higher gasoline prices, which rose by 28.6% in April and over 38% since the war began, drove transportation costs up by 7.6% in April, their highest since November 2022. Gasoline prices also went up on an annual basis as the impact of the carbon levy ended.
– Other major annual price increases in April were in food, which rose by 3.5% in April, against a 4% increase in March; rents increased by 3.6% and passenger vehicle prices rose 2.8%.
– The core measures of inflation, closely watched by the Bank of Canada to gauge underlying inflation trends, slowed down. CPI-median, the centermost component of the CPI basket, was at 2.1% in April from 2.3% in March. CPI-trim, which excludes the most extreme price changes, was down to 2% from 2.2% in the prior month.
– Prime Minister Mark Carney has offered a five-month relief on gasoline excise duty of 10 cents per liter.
– The Canadian dollar was weaker after the inflation report and was trading down 0.20% at C$1.3766 to the U.S. dollar, or 72.64 U.S. cents. Yields on the two-year government bonds were down 4 basis points to 2.782%.
– Money market bets for a rate hike slipped after the CPI report and were pricing in a 25 basis point hike in interest rates in October.
(Reporting by Promit Mukherjee; Editing by Dale Smith and Susan Fenton)
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