Key Moments:

• Canada’s CPI rose 1.7% year-over-year in April compared to the 2.3% increase reported the previous month.
• Core CPI, excluding food and energy, climbed 2.5% YoY and 0.5% MoM
• The CAD appreciated 0.15% against the greenback following Tuesday’s CPI data publication.

Inflation Eases as Energy Costs Drop

Canada’s annual inflation rate cooled in April, with the Consumer Price Index (CPI) rising 1.7% year-over-year, a notable deceleration from the 2.3% increase recorded in March. Monthly CPI also fell slightly, registering a 0.1% decline after a 0.3% gain the previous month, according to data released by Statistics Canada.

The April figures came in below expectations, and the decline was driven primarily by falling energy prices. Specifically, the cost of gasoline dropped 18.1% year over year in April, a sharp contrast to March’s minor 1.6% decrease. Statistics Canada attributed this steep decline largely to the removal of the consumer carbon price.

Core Inflation Remains Elevated, Currency Market Reacts

The Bank of Canada’s preferred measure of inflation, which strips out volatile items such as food and energy, remained sticky. Core CPI advanced 2.5% year-over-year and rose 0.5% month-over-month, suggesting underlying price pressures are still present despite the broader easing in headline inflation.

Meanwhile, food prices accelerated in April, with goods purchased from stores up 3.8% year-over-year compared to a 3.2% rise in March. This marked the third consecutive month that food inflation has outpaced the overall CPI. Travel-related costs also moved higher as travel hour prices surged 6.7% compared to the same period last year, bouncing back from a 4.7% drop in March. Travel tour prices also increased 3.7% MOM, a recovery from the previous fall of 8%.

Tuesday witnessed the Canadian dollar climb higher, extending yesterday’s gains as investors responded to the inflation data. This pushed the USD/CAD lower and below the 1.3930 level.