Analysis: Even if the rise in oil prices stimulates inflation, the Bank of Canada is expected to remain cautious.

Michael Davenport of the Oxford Economics Institute stated that before the US-Iran war led to a surge in energy prices, there was some good news in terms of Canadian inflation, with overall CPI inflation slowing by 0.5 percentage points to 1.8%. This war has cast a shadow over the inflation outlook and greatly increased uncertainty. Davenport estimates that if Brent crude oil prices remain near $100 per barrel in the coming months, Canadian second-quarter inflation could rise by over 3% year-on-year; if oil prices average around $140 per barrel in the next two months, inflation could approach 4% by mid-year. However, the economist predicts that the Bank of Canada will ignore the temporary inflationary effects of the oil shock and maintain a wait-and-see approach throughout 2026.