Canada’s inflation rate accelerated to 2.8 per cent in April as surging gasoline prices pushed costs higher and complicated the outlook for interest rates amid ongoing geopolitical tensions in the Middle East.
BNN Bloomberg spoke with Pedro Antunes, chief economist at Signal49, about how rising energy prices, inflation expectations and slowing economic growth could shape the Bank of Canada’s path forward on rates.
Key Takeaways
- Canada’s annual inflation rate rose to 2.8 per cent in April, driven largely by a sharp increase in gasoline and energy prices.
- Rising energy costs are beginning to feed into transportation and broader consumer prices, raising concerns about persistent inflation pressures.
- Inflation expectations remain a key concern for central banks because higher consumer costs can drive wage demands higher.
- The Bank of Canada is expected to hold interest rates steady as policymakers balance weak economic growth against renewed inflation risks.
- Canada’s inflation rate remains below the United States and several other developed economies, partly due to policy measures that lowered fuel costs domestically.
Read the full transcript below:
LINDSAY: Canada’s inflation ticked higher in April, rising to 2.8 per cent, driven by soaring energy prices. The price of gas rose by a whopping 28.6 per cent. So, let’s get some reaction from Pedro Antunes, chief economist at Signal49. Good morning, it’s great to have you join us.
PEDRO: Well, good morning. Thanks for having me.
LINDSAY: What do you make of the numbers we’re seeing? How does this line up with your expectations?
PEDRO: Well, I guess we’re pleasantly surprised. We were thinking we might hit above three per cent on the topline inflation numbers. So it’s good news. There are some other aspects of inflation that have come down a little lower than trend. I’m talking about rent and food prices perhaps easing a little bit. Transportation costs as well, like travel costs, have come down a little bit, which was a bit of a surprise. But we’re obviously very worried about this topline inflation. I think the central banks are very worried about this because it’s hard to deal with for a central bank when the economy is weak and you have a supply shock that affects essentially energy prices and gasoline prices. So it’s going to be a challenging environment, I think, for central banks until this war in the Middle East gets settled.
LINDSAY: Yeah, I mean, is that kind of the driving factor here? Obviously, we saw that really high increase in energy and gas prices. Were you expecting that to be so high?
PEDRO: No, we were pretty much in line with the actual numbers that came out. We know that there are a lot of things happening within just the gasoline price itself, but the bottom line is we’ve got oil prices that are nearly double where they were at the beginning of the year, and that’s still a three per cent direct hit. It’s three per cent of the consumer basket, gasoline, so that’s the direct hit. The concern, I think, for central bankers is a repeat of what we saw when Russia invaded Ukraine and we had a commodity price increase because essentially energy feeds into everything. It feeds into transportation, for example, very broadly. So if this lasts, then it’s going to start to have an impact on essentially everything that we certainly import and most of what we consume more broadly. So this is, again, the concern. The bottom line is this energy price shock is already leading to high inflation. Could it lead to worse outcomes for the economy more broadly?
LINDSAY: I do want to talk about interest rates in a moment, but I just want you to explain that because I feel like there’s a bit of a disconnect there, right? Because, as you say, energy prices affect the prices of a lot of other things, food prices, transportation, as you say, as well. But there seems to be a bit of a disconnect from what we’re seeing in the numbers coming out today in terms of energy going up, some of these other prices going down. Is it just going to take a while before we see that?
PEDRO: It’s just temporary. I mean, I think we’re going to see it. I know that we’re seeing surcharges in air travel, for example. These things will all end up feeding the bottom line. But again, the concern here for the central bank is around inflation expectations. So even though core inflation is still kind of within the band, when households start seeing what they’re paying at the pump, they’re seeing topline inflation numbers close to three per cent, then that drives essentially their wage expectations. Following that shock back in 2022, where we had a commodity price shock that fed into prices in general, we then had two or three years with wages trying to catch up to that loss in purchasing power. It took a long time for central banks, not just in Canada but across the developed world, to get inflation expectations back down. I think this is a concern that, again, the longer this war lasts, the more likely it is that we’re going to have this inflation build into expectations, and it becomes much tougher for central banks to deal with.
LINDSAY: And it seems to be that way already. Bank of Canada expectations for a January rate change have increased slightly. We know that Tiff Macklem said they feel as though the inflation rate is going back toward that two per cent target. That was the last time we heard from the Governor of the Bank of Canada. It’s obviously not going in that direction. So what do you make of rate cuts, rate hikes this year? What do you think we’re going to see for the rest of 2026?
PEDRO: Yeah, again, this is tough for the central banks to deal with because central banks only have one tool, and that is to raise interest rates to slow economic activity, and then that tends to get inflationary pressures down. But when you have an underlying weak economy, I mean, the Canadian economy right now is not very strong at all. We’ve seen very soft employment numbers. We’ve not seen a lot of investment yet. We’re hopeful for that, and certainly our trade sector is getting hammered. So it’s not a strong outlook to begin with. And what’s driving inflation? It’s not a heated economy, it’s essentially this supply shock that we’re feeling. So it’s very tough for central banks to deal with. I think the central bank, for now, is going to stand pat. They’re not going to move at all. We were already at a point where the central bank feels their interest rates are neutral. In other words, they’re neither taking away from nor adding to the economy at the current point. I doubt we’ll see rates being lowered because of this supply shock, so I think the central bank is probably going to stand pat unless we start to see this get built into inflation expectations. Then, if anything, we may see interest rates come up. We’re already seeing signs or hints of that in the U.S.
LINDSAY: It’s interesting, too, when you think about it. It was about a year ago that Ottawa removed the consumer carbon price, but a year earlier did that skew the annual price comparison in April for this year?
PEDRO: Yeah, well, I think that’s now coming out of the numbers essentially. I do think the policy around lowering the excise tax on gasoline, that is one way to lower topline inflation. I know it’s still high, gasoline prices are still high, but the excise tax is a fiscal policy that is removing 18 cents a litre, and that will help reduce topline inflation and perhaps help the central bank in its fight against this topline inflation number. In fact, our inflation numbers at 2.8 per cent are a lot weaker than what the U.S. had in the same month at 3.8 per cent, and the situation is even worse for Europe and other developed economies. This comes back to the point where, again, this is a global energy price shock. So it’s not just Canada. This is going to impact purchasing power across the world, and I think the repercussions in many other countries are going to be a lot worse than for Canada. We’re still a net exporter of oil. There are still some positives here with high energy prices.
LINDSAY: Okay, we’ll have to leave it there. Out of time. Pedro Antunes, chief economist at Signal49. Always good to have you on. Thanks so much.
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This BNN Bloomberg summary and transcript of the May 19, 2026 interview with Pedro Antunes are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
