Inflation Hits 2.8% in April Due to Rising Gas Prices Amid Iranian Conflict

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Statistics Canada reports a rise in inflation to 2.8% in April, primarily driven by higher gas prices linked to the war in Iran. The report highlights various factors contributing to the inflation rate, including changes in fuel taxes and shifts in consumer prices.

OTTAWA — The annual inflation rate surged to 2.8 percent in April, as reported by Statistics Canada, marking the most significant increase in nearly two years. This rise is largely attributed to a 28.6 percent year-over-year spike in gasoline prices, fueled by ongoing conflicts in the Middle East that have disrupted global oil shipments, leading to higher costs at gas stations across Canada. Additionally, April saw the transition to more expensive summer gasoline blends, which typically exacerbates price increases at the pump.
The federal government's decision to suspend the fuel excise tax mid-month played a crucial role in moderating the price hikes observed in April. This suspension provided some relief to consumers, countering the otherwise sharp increases caused by external factors. The inflation rate of 2.8 percent for April represents a notable rise from March's rate of 2.4 percent, although a Reuters survey had anticipated an even steeper increase, projecting inflation to surpass three percent.
This latest report from StatCan reflects the highest annual inflation rate since May 2024, a fact influenced by Ottawa's earlier removal of the consumer carbon price. This policy change, enacted a year in advance, skewed the annual price comparisons upward for April. The elimination of the carbon price effectively reduced gasoline prices by about 18 cents per litre in April 2025, but as this reduction has now dropped out of the annual comparison, it has contributed to the overall rise in inflation.
In addition to energy costs, other consumer prices also saw fluctuations. Clothing and footwear prices increased by two percent in April, rebounding from a slight decline of 0.4 percent in March. Meanwhile, the cost of travel tours decreased by 11 percent annually, and a slowdown in rent inflation across the country helped balance out the rising energy prices. Notably, British Columbia experienced a unique situation where its inflation rate did not accelerate in April, attributed to a shrinking population.
Food inflation also showed signs of easing, with the rate dropping to 3.5 percent in April from four percent in March. This decline was primarily due to slower price increases for essential grocery items such as chicken, fresh vegetables, coffee, and tea, which had previously seen sharp hikes earlier in the year.
These April figures are significant as they represent the last set of inflation data the Bank of Canada will analyze before making its upcoming interest rate decision scheduled for June 10, 2026. The interplay of rising gas prices, changes in taxation, and other economic factors will likely influence the central bank's monetary policy in the near future.

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