Canada’s inflation rate rose to 2.8 per cent in April as higher energy prices caused by the war in Iran continued to drive up fuel prices , Statistics Canada said Tuesday.

Inflation accelerated from the 2.4 per cent reported in March and marked the highest rate since May 2024, when headline inflation was 2.9 per cent.

However, April’s inflation rate was slightly lower than the Bank of Canada’s expectations . The central bank projected inflation to peak at three per cent in April before gradually returning to the two per cent target in early 2027 in its most recent Monetary Policy Report.

“That’s good news, to a certain degree. It could have been worse — market expectations were around 3.1 per cent,” said TD senior economist Andrew Hencic.

“But it has raised some questions. With the energy shock so large, what else is going on that’s offsetting that to some degree?”

Tuesday’s report comes as consumers are already feeling squeezed.

Rent prices increased by 3.6 per cent year-over-year in April, down from 4.2 per cent in March. However, rents have increased by 30.8 per cent since April 2021.

Clothing and footwear prices rose by two per cent on an annual basis in April — led by higher prices in women’s clothing.

The price of food purchased from stores also rose by 3.8 per cent on a yearly basis in April, down from 4.4 per cent in March. Statistics Canada said prices for meat and fresh vegetables decelerated slightly, while prices for coffee and confectioneries rose at a slower pace.

Hencic said supply factors play a big role in rising food prices. Beef prices have soared in the past few years, for example, and the trends show no signs of easing. Coffee prices have also risen — Statistics Canada data suggest Canadians paid 27.9 per cent more for coffee at the grocery store in August 2025 than a year earlier.

“There’s a whole host of stuff going on in food that you know makes the cost-of-living challenges a little bit tougher. A 3.8 per cent year-over-year increase is still a healthy increase that folks are having to deal with,” he said.

Higher fuel costs also affected the cost of transportation — up 7.6 per cent year over year in April — and helped drive overall inflation higher.

However, BMO Financial Group chief economist Douglas Porter said higher transportation and fuel costs have yet to bleed through to other goods and services. He pointed to decelerating food prices, which rely a lot on transportation, and declining air fares as examples.

“I do find that surprising,” Porter noted. “That said, I don’t think we can let our guard down. The Bank of Canada certainly isn’t going to let its guard down, not with energy prices still rising, so I don’t think anybody’s really relaxing on this result, but we’ll take a small bit of good news as it arrives here.”

Both economists also observed that median core inflation has been declining steadily from 2.8 per cent in November 2025 to 2.1 per cent in April 2026. They interpreted that as a sign that the economy remains relatively soft and businesses are having a hard time passing along increased costs to consumers.

“Now, the longer they stay high, the more pressure companies are likely going to face,” Hencic added. “Thus far, the pass throughs, to the extent that they exist, have likely been small, just based on what we’re seeing in the data.”

Porter said he wouldn’t be surprised if gasoline prices further drove inflation to three per cent or higher in May and June.

The uncertainty around the Canada-United States-Mexico Agreement negotiations will further dampen economic growth, he added.

“I think the economy will struggle to grow this year. I think that’s the cold hard reality,” he said.

“Everyone hates inflation. It hurts consumer confidence in general. People have to channel more spending in the necessities, which leaves them with less income to spend on other discretionary goods, like travel and entertainment. That could have a real impact on the economy.

“Having said that, I’ve been impressed at how well activity has held up so far.… The economy seems to be hanging in there, even in the face of this energy shock, but it’s hard to be really upbeat on the growth outlook when you’re dealing with both an energy shock and the deep trade uncertainty,” Porter said.

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