It’s back

Another day, more drama.

This time the Holy War (according to crusader Pete Hegseth) has come home to roost in Canada with a nasty jolt to our inflation rate. From a lovely 1.8% in the last reading, this morning it came in at 2.4%.

Coulda been worse, the economists said. They were expecting a little bit more, with gas prices elevated thanks to the tussle over the Strait of Hormuz – made worse yesterday when US Navy cowboys blew a hole in an Iranian cargo ship.

By the way, it seems things will get more expensive before ‘normal’ returns (if it ever does). “More of this lies ahead,” says Scotia economist Derek Holt. “When April CPI arrives on May 19th it’s likely to show another strong pop higher amid multiple influences. A very preliminary estimate leans toward another jump to 2.9% or maybe even 3% y/y.”

We all have no idea where things are actually headed. As stated yesterday, Mr. Market is counting on the Trump Put to wind down the Iran War in short order, reign in that wild Bibi guy and stop irritating the Saudis so they can keep investing in the Trump family businesses. That will probably be the outcome, but timing is unknown. The fact there was escalation on the seas yesterday, yet markets reacted in a tepid fashion, tells the tale.

This war will end, investors think, before much more stuff is broken.

Anway, here we are. More inflation. Groceries and rents are up again. Rising fuel costs are hitting the airlines, car sales and travel. The good news, maybe, is that inflation could top out for the year next month, says BMO’s Doug Porter.

“The picture for underlying inflation was a bit better than expected,” he says, “and continues the recent pattern of steadily moderating core inflation trends. Our considered view is that if it were not for the conflict with Iran, the discussion would currently be revolving around the strong possibility of BoC rate cuts, not hikes. This report reinforces that opinion.”

Over in the CIBC economics department, they agree. An uglier number next month, then better after that. Probably. “Continued slack within the economy should keep domestically-driven services inflation tame and we continue to see the Bank of Canada holding interest rates at their current level throughout 2026.”

By the way, bond yields fell a little after this morning’s report was published, showing the same sentiment. Inflation sucks, but we know why it came back and we all expect TACO. So, chill.

The bottom line for most people is that interest rates will stay where they are. Fixed-rate mortgages will likely decline a little along with those bond returns, making things slightly easier for the 1.3 million households facing a renewal over the coming months.

Meanhile the feds are reducing the excise gas tax, starting today, which will carve into increased costs a tad. Plus we have a pivotal financial update coming from Ottawa in eight days. All we know about that for sure is Pierre Poilievre won’t like it, hold it up as proof he knows more about economics than the economist PM, and Canada is utterly broken.

And speaking of losers, economist Holt is warning the Bank of Canada’s boss not to repeat the mistakes he made following Covid. That was, he says, “a high stakes gamble at a central bank that made the wrong bet in disastrous fashion the last time. It waited until it had all the evidence of a severe inflation problem before hiking and we went from 0.25% to 5%. Had it dispassionately focused upon inflation… the policy rate in Canada might have levelled off much lower than 5%. Not as many mortgage borrowers would have been reeled in and then subject to massive resets.”

Economists also point out the current CB rate in Canada – 2.25% – is below the inflation rate, which means the ‘real’ rate is negative. As in, “hey, gang, here’s some free money so come and load up to buy stuff you can’t actually afford!”

Well. If the inflation rate exceeds 3% soon and the central bankers are too chicken to corral it, we’re all being tied to the unpredictable coattails of the rogue American president. Yikes.

In his revealing video release Sunday morning Mark Carney called our ties to America “weaknesses”. That could make Trump’s head explode. But it may be too late.

About the picture: “Hi Garth, this is Leia,” writes Anibal in Winnipeg. “We adopted her 3 years and she has brought love and joy to our family. Thank you for all your work educating Canadians. I preach your blog to any person I run into. It’s too bad that most people don’t want to learn about personal finances, but I guess someone always needs to be the Greater Fool.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/04/20/its-back-4/