The recent spike—moving from 2.4% in March to 3.2% in May 2026—is almost entirely driven by an external energy shock. Global oil disruptions sent Canadian gasoline prices surging by 33.2% year-over-year in May. When you remove volatile items like gas and fresh food, the rest of the economy is actually quite calm. Canada’s “inflation excluding gasoline” sits at a much milder 2.2%, reflecting a softer domestic demand where businesses aren’t aggressively raising prices.

Core inflation (measured via metrics like CPI-trim and CPI-median) strips out highly unpredictable, short-term price swings like global oil or seasonal fruit costs. While the headline inflation number hit 3.2%, Canada’s core inflation has remained rock-steady between 2.0% and 2.2%. The Bank of Canada focuses on this because it reveals the true, underlying health of the domestic economy. Since core inflation is right on target, the central bank knows the spike is a temporary external issue rather than an domestic economy overheating.

It’s highly unlikely. Central banks typically “look through” temporary supply-side shocks like a spike in global oil prices because raising interest rates can’t produce more oil or lower gas prices; it only hurts local borrowing. Because core inflation remains steady and Canada’s broader economic growth has been relatively soft, economists expect the Bank of Canada to keep its policy interest rate steady at 2.25% through the end of the year, waiting for the energy volatility to peak and clear out.