Canada's headline inflation rate just hit 2.8%, the highest in about two years.
The number sounds bad on first read - the story underneath it tells the opposite.
The Consumer Price Index rose 2.8% year over year in April, up from 2.4% in March - but stripping out gasoline, inflation actually slowed to 2.0%, from 2.2% the month before.
The print also came in well below where the market expected, with economists looking for 3.1%.
Gasoline prices alone jumped 28.6% year over year, with the move driven mostly by a base-year effect. Canada scrapped its consumer carbon levy on April 1, 2025, which produced a one-month drop in gasoline last year - and that drop has now rolled out of the 12-month comparison.
Fuel oil prices climbed 41.3% on the year, partly because of higher oil prices tied to the conflict in the Middle East. Natural gas prices were still lower year over year, but by far less than in March, when they were down 18.1% versus only 2.4% in April.
Moderating the squeeze was the federal fuel excise tax, which the government temporarily suspended on April 20. On a month-over-month basis, the headline CPI rose just 0.4%, or 0.3% after seasonal adjustment, which is closer to where the BoC wants the underlying trend.
The catch: the energy spike is real, but it's the kind of move that fades on its own as the base effect cycles out.
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The Bank of Canada doesn't set rates on the headline number. It watches its trimmed-mean and median core measures, which strip out the most extreme price moves.
Both of those just fell. The trimmed-mean is now 2.0% and the median is 2.1%, both the lowest in five years and below what economists expected.
Rent inflation also slowed, dropping from 4.2% in March to 3.6% in April, while transportation prices rose 7.6% as the gasoline base effect washed through, and travel tour prices fell 11% on the year.
The under-the-hood signal is softer, not harder.
The regional picture matches the soft-core story. Prices accelerated in nine provinces in April, but British Columbia held steady at 2.5%, the only province with no jump - and rent growth there slowed sharply from 6.4% in March to 3.4%, after four straight quarters of population decline.
For investors trying to read where the Bank of Canada goes next, the split message matters more than the top line - headline numbers will look ugly while the gasoline base effect runs through, with core doing the opposite.
The BoC has said it does not expect higher energy prices to spread into broader inflation expectations, and April's print is consistent with that view.
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