Canada's inflation rate cools to 1.7% as consumer carbon tax ends

illuminem summarises for you the essential news of the day. Read the full piece on The Financial Post or enjoy below:

🗞️ Driving the news: Canada’s annual inflation rate cooled to 1.7% in April, down from 2.3% in March, primarily due to the removal of the federal consumer carbon tax and a sharp decline in energy prices
• Gasoline prices dropped 18.1% year-on-year, and natural gas fell 14.1%, offsetting broader inflationary trends
• However, core inflation measures — closely monitored by the Bank of Canada—rose, complicating expectations for interest rate cuts

🔭 The context: The carbon tax rollback and lower oil prices follow a broader economic slowdown linked to global trade disruptions and tariffs
• Despite falling headline inflation, the Bank of Canada’s preferred metrics — CPI-common, CPI-median, and CPI-trim — all accelerated, pointing to underlying price pressures
• At the same time, Canada's unemployment rate rose to 6.9%, driven by manufacturing losses

🌍 Why it matters for the planet: The removal of carbon pricing weakens Canada's climate policy framework and sends mixed signals on emissions reduction
• Carbon taxes are a key tool for internalizing environmental costs and incentivizing clean energy transitions
• While inflation relief may be welcomed by consumers, the move risks undermining progress on decarbonization and emissions targets

⏭️ What's next: The Bank of Canada’s next policy decision on June 4 now hinges on a delicate balance between weak growth and persistent core inflation
• Analysts remain divided: while some anticipate rate cuts this summer, others argue rising core measures may force the central bank to delay or pause monetary easing
• The broader trajectory will depend on economic data and the evolving impact of tariffs and climate-related fiscal changes

💬 One quote: “This back-up in core above three per cent pretty much washes away [the case for a rate cut],” — Douglas Porter, Chief Economist, Bank of Montreal

📈 One stat: Gasoline prices fell by 18.1% year-over-year in April, leading the decline in Canada’s energy prices

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