Headline CPI (red) accelerated sharply after the Hormuz closure in March, while CPI-trim (grey dashed) and CPI-median (light grey dashed) continued their downward trajectory, falling to five-year lows in April. The 80-basis-point gap between headline and core is the widest since 2022 and reflects a supply-driven shock not yet transmitting into underlying price pressures.

The divergence between the headline and core in the Hormuz closure period is the defining feature of the current inflation cycle in Canada; services inflation's drop to 1.7% in April is the single most important number in the report for the Bank of Canada's near-term policy calculus.

Transportation inflation (grey bars) is the dominant driver of the headline CPI acceleration since March. Core inflation (dashed green line) has remained near or at the Bank of Canada's 2% target throughout the war period, confirming that energy prices have not passed through to broad price-setting behaviour as of April. The BoC's own April MPR peak forecast of "around 3%" is shown as a dashed red reference line; April actual landed 20 basis points below it.

The divergence between headline CPI and core in March 2026 reflects the energy component's outsized role in the Hormuz shock. The carbon levy base-effect that suppressed year-over-year energy comparisons through 2025 has fully cleared from April, making tomorrow's release the first unencumbered read on whether oil prices are feeding into core.

CPI (left axis, solid) and the unemployment rate (right axis, dashed) are moving in opposite directions heading into the Bank of Canada's June 10 decision, with CPI approaching the 3% ceiling of the control range and unemployment at a six-month high of 6.9%. The Iran War marker shows the divergence accelerating after the March oil price shock. April CPI shown as the Bank's projection; confirmed figure releases May 19.

The headline CPI acceleration from 2.8% in February to 3.8% in April is almost entirely Iran-war-driven energy inflation. Core CPI, which strips out food and energy, rose more modestly from 2.6% to 2.8% over the same period, but its 0.4% monthly gain in April is the most important number for Warsh's first meeting calculus. Source: U.S. Bureau of Labor Statistics.