Good morning. In focus this week: Canada gets a price check as the oil shock spreads; world leaders meet over Iran as Donald Trump put a planned attack on the country on hold; and Canadian EV sales are picking up as Honda pulls up stakes.
Up first
In the news
Globe investigation: A businessman appointed to the board of Invest Alberta by Premier Danielle Smith has said he is a certified accountant for more than a decade despite not having those credentials.
Iran: Government bonds remained under pressure on fears that the impasse over the opening of the Strait of Hormuz will keep boosting energy costs, stoking inflation.
Artificial intelligence: Shares of Canada’s leading engineering companies are sinking despite solid financial results over fears that AI will eat into corporate profits.
A gas station in Ottawa last month. Gas prices in Canada have risen by roughly 20 to 25 cents per litre since the beginning of April.Keito Newman/The Globe and Mail
In focus
This week’s reading list
1. Price check
Talking inflation with Globe economics reporter Mark Rendell
April’s consumer price index report this morning is widely expected to show headline inflation moving higher, largely because global oil prices have been climbing and are now feeding through to gasoline prices.
There is also a technical wrinkle: the federal fuel charge – often called the consumer carbon tax – was removed in March, 2025, which means it will no longer help hold down year-over-year comparisons for gas prices.
The Bank of Canada said last month that it expects headline inflation to land around 3 per cent in April – the top of its target range. I spoke with Mark to help make sense of what that number means.
What can we learn from today’s report?
There’s no question the headline inflation print for April will come in hot. The bigger question is what’s happening to inflation under the hood. Central bankers can look through a temporary jump in headline inflation caused by a spike in energy prices. But they start to get nervous when they see a whole bunch of other goods and services prices rising in tandem.
How do they see that?
Macklem and Co. will be watching core inflation measures like CPI-trim and CPI-median – which strip out volatile prices to capture underlying price trends – as well as measures like CPI-excluding energy. Core inflation measures have been trending lower for months and stood just above 2 per cent in March. Signs that core measures are heating up again would set off alarm bells at 234 Wellington St.
If inflation rises at the same time the labour market weakens and economic activity slows, does the BoC focus on upside risks to inflation or downside risks to economic growth?
This is the key conundrum for the Bank of Canada. It’s dealing with a spike in inflation caused by global oil prices at the same the Canadian economy is struggling to grow under the weight of U.S. trade uncertainty. This is pulling interest rates in two different directions. Do you hike rates to constrain inflation? Or cut them to support the economy? Or maybe you just sit on your hands?
For now, the BoC is hand-sitting, and financial markets don’t expect any interest rate movements until the fall. But Macklem has suggested he and his team may have to move one way or another in the coming months, depending on the kind of economic shock coming down the pipeline.
What would that look like?
If the U.S.-Iran war continues and oil prices rise further, the BoC might deliver “consecutive” interest rate hikes to keep inflation in check, Macklem said last month. On the other hand, if the review of the North American trade pact flounders and the U.S. hits Canada with new tariffs, he said the bank may be cutting rates.
Of course, both could happen at the same time, and then the BoC is in a real pickle (and so are the rest of us).
What is the cleanest way to explain the difference between Canadians feeling inflation and economists saying underlying inflation remains contained?
With headline inflation moving back towards 3 per cent, central bankers are getting nervous again after a year-and-a-half of fairly tame inflation readings. For most Canadians, however, cost-of-living concerns haven’t gone anywhere. That’s partly because prices for most goods and services are simply much higher than they were a few years ago, following the biggest surge in inflation in four decades coming out of the COVID-19 pandemic. Grocery prices have risen 22 per cent since 2022, while other consumer prices rose 13 per cent on average over that period.
And while the pace of price changes has slowed for many goods and services, inflation remains high in key areas like groceries and rent
Gasoline and grocery prices have a major influence on consumer perceptions of inflation because people see and pay these prices so often. For a central banker, inflation is the change to a broad basket of goods and services prices over time. For the average Canadian, it feels more like the numbers they see at the gas pump or in the grocery aisle.
In this week's episode of Suits: Donald Trump and Xi Jinping in Zhongnanhai, the ruling Communist Party's tightly guarded leadership compound in Beijing.Evan Vucci/The Associated Press
2. As the world turns
Finance ministers and central bankers from the G7 continue to meet in Paris today to discuss the Iran stalemate, critical-minerals supply chains and the oil-price shock now moving through the global economy.
On Monday, U.S. President Donald Trump paused a planned attack against Iran, a day after he took to social media to warn that “the Clock is Ticking and they better get moving, FAST, or there won’t be anything left of them.”
Ten-year German bond yields reached 3.193 per cent, the highest since 2011, Eric Reguly writes. Ten-year British government bond yields hit their highest level since 2008, with yields at 5.18 per cent, a climb of 0.6 percentage points since the start of the year.
3. Chipping in: Nvidia has been the market’s clearest proxy for the AI boom for several years, but this quarter comes with a sharper geopolitical edge after chief executive Jensen Huang appeared in Beijing during President Donald Trump’s China visit.
4. Flight test: Montreal-based CAE Inc., set to report on Thursday, said last week that it was exploring a sale, partnership or outside investment for Flightscape, its aviation software business. Chief executive Matthew Bromberg is trying to sharpen the company after years of expansion left some assets producing weaker returns than expected.
5. Sentiment to the south: Investors will be watching Walmart as a measure of household spending in the face of rising inflation. The retailer has drawn shoppers looking for value on groceries and household essentials – including higher-income customers who are trying to stretch their budgets.
Charted
Watt’s going on
Honda may be shelving its plan for an electric-vehicle production complex in Canada, but demand for EVs is officially on the upswing.
In March, there were roughly 21,500 sales of new zero-emission vehicles, an increase of 75 per cent from a year earlier and the highest sum since late 2024, according to Statistics Canada figures published Thursday.
Quoted
It’s the coming out of winter. Seeing people we haven’t seen all winter. It’s fantastic.
— Devon King
A homegrown hockey tournament thaws the heart of the NWT.
Morning update
Global stock and bond markets steadied after U.S. President Donald Trump paused a planned attack on Iran and said there was a good chance of a nuclear deal, sending oil prices lower.
Wall Street futures were in negative territory, while TSX futures pointed higher.
Overseas, the pan-European STOXX 600 was up 0.62 per cent in morning trading. Britain’s FTSE 100 rose 0.54 per cent, Germany’s DAX climbed 1.07 per cent and France’s CAC 40 increased 0.59 per cent.
In Asia, Japan’s Nikkei closed 0.44 per cent lower, while Hong Kong’s Hang Seng finished 0.48 per cent higher.
The Canadian dollar traded at 72.65 U.S. cents.