Canada Economics Weekly: Falling oil prices dovish for BoC despite hawkish Fed

Research evidence excerpt

Canada Economics Weekly: Falling oil prices dovish for BoC despite hawkish Fed

Canada Economics Weekly

18 June 2026 Citi Research

Next Week’s Highlights

Key events in Canadian markets next week

Monday, June 22, 8:30am

CPI NSA MoM (May) – Citi: 0.7%, median: 0.8%, prior: 0.4%

CPI YoY – Citi: 2.9%, median: 3.0%, prior: 2.8%

Consumer Price Index – Citi: 169.1, median: NA, prior: 168.0

Headline CPI should rise 0.7%MoM in May, again boosted by an increase in average

gasoline prices. This would push year-on-year CPI to 2.9%, consistent with BoC

expectations for annual CPI to run close to 3%. But with falling oil prices, gasoline

prices have been declining in June and should weigh on June CPI.

Details of CPI data, and particularly various core measures, remain much more

important than headline CPI. We expect continued slowing in shelter prices as

home prices decline, with downside risks to components like rents. CPI rents have

been stronger than other industry rent data and could still slow further. But we do

expect a bounce-back in some components that were weak in April, such as food

and recreation services. Energy-sensitive prices like airfares still could rise more

than usual in June/July given recent large increases in jet fuel costs.

Recent monthly core inflation readings across a range of core indicators (CPI-trim,

CPI-median, CPI ex food, energy, and taxes) have been particularly soft. It would

not be surprising to see some rebound in monthly core inflation data even if higher

energy prices were not posing a new upside risk. We would not necessarily take a

month or two of stronger monthly core inflation data as a concerning sign of

reaccelerating inflationary pressures.

Months of core inflation running below 2% on an annualized basis should help keep