The nothingburger

You can stand down, now. Inflation’s no longer a thing.

That’s the latest from the feds. Honestly. Go buy something. It’s all good. Seriously.

The latest cost-of-living increase did not chime in at 3.5%, the way Bay Street economists like Derek Holt had forecast. Not even close, despite the fact oil has ben flirting with $110 a barrel in recent hours.

The official count is 2.8%. Yes, that’s more than the last report, which came in at 2.4%. Not only is it considerably lower than everyone was expecting, but it appears (unlike in the US) this war-time energy jolt has not spread throughout the economy.

“Most measures of core inflation took a further step back in April, with yet another month of mild gains in seasonally adjusted terms,” says a surprised Douglas Porter. Food was down. Rents were down. And mortgage interest, “has also now become a serious source of disinflation, falling 0.1% y/y, the first drop since mid-2022 and compared with the peaks of 30%+ y/y just three years ago.”

“Gasoline prices surged,” economist Andrew Grantham wrote after the release, “but the jump wasn’t as high as expected and core measures of inflation remained muted, supporting the current wait-and-see stance of the Bank of Canada.

“While price pressures may accelerate further ahead, the weakness of core inflationary measures as oil prices were initially spiking is an indication of the slack that exists within the Canadian economy, which will continue to put downward pressure on inflation components that aren’t greatly affected by oil prices.”

The biggest fear – contagion – seems to have gone poof. It’s a material contrast to what’s been happening south of the border where inflation has roared past 3% and infected large swaths of society.

“Our broader view that higher oil prices will lift headline inflation and cut into household purchasing power but are unlikely to reignite systemic inflation pressures,” says RBC’s Abby Xu. “While some categories, particularly food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labour market conditions.”

Yeah, that’s why. The American economy (and stock market) is still hot, thanks to Trump’s corporate tax cuts, massive increases in US government spending (and debt), unbridled AI exuberance plus a war that was costing $1 billion a day. Job creation last month surprised to the upside, while here we’re shedding paycheques. Canada has avoided recession even in the teeth of unfair American tariffs, but growth is glacial, consumers are freaked out and the tradespeople I hang with tell me their order books are empty.

So everyone seems to agree now on what this means.

“Near-term Bank of Canada rate-hike speculation—which has ratcheted up in recent weeks—should calm on this friendly report,” says BMO Economics. “This cool core inflation backdrop reinforces our bias that rate hikes would be a big mistake in the current Canadian economic landscape. Still, the reality is that as long as oil prices continue to grind higher, the rate-hike chatter will remain.”

Ditto at the Penguin Bank. No hike.

“Looking forward, core measures of inflation are likely to accelerate again over the summer, as air fare increases are picked up and higher transportation costs result in price rises in some other areas as well. However, the slack currently in the economy will limit the extent of that acceleration, and we continue to forecast that the Bank of Canada will hold its overnight rate at 2.25% throughout the remainder of the year.”

And the country’s biggest bank (and holder of residential mortgages) agrees.

“Upside inflation risks could build the longer energy prices remain at elevated levels, but overall the April data support our base case that the Bank of Canada will remain on hold for the remainder of 2026.”

There ya go, kids.

Mortgages stay about where they are – with perhaps some small nibbling down for five-year month, since bond yields have given up ground on this inflation report. No change in yesterday’s blog advice, however, because variable-rate mortgages give no meaningful advantage while also introducing risk. The world is still a wonky place. Trump is still likely to get more extreme as his term heads into its final two years. And there is no going back to the good old days with Iran or oil security.

Canada is on then right path with major infrastructure projects coming and new trade deals emerging. But it will take years to get there. In teh meantime, the advice remains.

Stay employed. Stay invested. Stay married.

You’ll be fine.

About the picture: “This photo of Chewie is a few years old, but it’s our fav,” writes Derek, in Sherwood Park, AB. “He’s not a fan of sunglasses, but  he put up with them just long enough for us to capture the moment.”

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

Source: https://www.greaterfool.ca/2026/05/19/the-nothingburger/