FED: MNI Fed Review-June 2025: Less Uncertainty, Less Easing

• National Bank: "The abolition of the carbon tax could have had a disproportionate impact during the month, resulting in a significant drop in gasoline prices. As a result, headline inflation may have declined by 0.2% on a non-seasonally adjusted monthly basis. If our forecast is correct, the annual inflation rate could fall to just 1.6%, which would be its lowest level in seven months. The Bank of Canada's preferred core measures could have been less encouraging, with CPI-trim likely rising from 2.8% to 2.9% and CPI-med remaining unchanged at 2.9%."
• Scotiabank: "April is normally a seasonal up-month for prices and the seasonal adjustment factor compensates for this...The key driver is the elimination of the consumer portion of the carbon tax on April 1st. Earlier guesswork in terms of the impact on gasoline prices has been removed because we now know how gas prices evolved. Lower gasoline prices should shave about 0.3 ppts off m/m NSA CPI. Another -0.1 is roughly estimated to be the impact of the removal of the carbon tax on home heating fuels. Retaliatory tariffs on imports also kicked in during April but are much more modest than ones the US imposed upon itself  and directly on Canada... there may be no clear effect [on the BoC's preferred core inflation gauges] when carbon taxes are cut...My hunch is that TM and WM will spike higher this time, thus returning the oscillating pattern of ups and downs back toward a strong rise. I would hope, however, that the BoC will be patient as it evaluates muddied evidence on inflation in the wake of direct and indirect effects of GST/HST cuts and hikes and the removal of the carbon tax."
• TD: "We look for headline inflation to slow 0.6pp to 1.7% y/y in April, reflecting a large one-time impact from eliminating the consumer carbon tax on April 1st. Lower
  energy prices will provide the key driver behind a 0.1% decline in total CPI, masking a stronger performance on an ex-energy basis, as the Bank's preferred
  measures of core inflation edge higher by 0.1pp to 2.95% y/y. Core goods and food prices will help offset the drag from removing carbon taxes, reflecting the lagged impact of a softer loonie amid recent acceleration in factory/import prices. We do not expect material impacts from countertariffs imposed in March, while shelter prices should see further deceleration. A 1.7% print for April CPI would leave headline inflation tracking slightly above BoC projections from the April MPR, but that alone is unlikely to deter the Bank from further easing. The BoC still wants to see more evidence of tariffs hitting growth, which leaves a spotlight on Q1 National Accounts, while recent labour market headwinds should also lower the bar for the Bank to step back off the sidelines."

MNI median consensus is for Y/Y headline CPI of 1.6% (though there are some forecasts 0.1pp on either side). The average of Trim and Median CPI measures is seen at 2.95% Y/Y, up from 2.85% in March, albeit only from a limited set of analysts. Excerpts from a few sell-side analysts' previews are below in alphabetical order of institution: 

• BofA: "We look for CPI to decrease in April by -0.2% mom nsa after increasing 0.3% in March. Year over year, we believe inflation will fall to 1.6% in April from 2.3% in March. A steep decline in gasoline prices is likely to be the main downward driver."
• CIBC: "CPI-Trim and Median may both tick up slightly on a year-over-year basis, largely due to base effects... While headline inflation is expected to be below the 2% target purely because of the removal of the consumer carbon tax, some recent better news on the tariff front should also make the Bank of Canada less concerned about inflationary pressures moving forward. That provides room for policymakers to respond to the weakening in the economy (reflected in stalling growth and a rise in unemployment) and cut interest rates by 25bp at the June meeting. "
• RBC: "We expect (after-tax) price growth in the Canadian consumer price index to drop to 1.6% in April from 2.3% in March, largely due to the removal of the carbon tax. Gasoline prices plummeted by 10% nationally in April from March, and we expect consumer natural gas prices plunged 27%. The underlying inflation trend (controlling for the tax change) will be closely monitored after March data showed a moderate downside surprise, breaking a five-month streak of mostly upside surprises. The April inflation data is unlikely to show significant pressure from import tariffs yet, and we expect import substitution to alternative sources and consumer substitution to non-tariffed products will ultimately limit the impact of Canadian retaliatory tariff measures on consumer prices (see issue in focus here). Still, we expect food price growth to remain elevated at about 3.2% year-over-year in April like March. Core inflation (excluding food and energy) is projected to rise to 2.6% from 2.4%. Annual growth in the Bank of Canada’s preferred median and trim measures, which exclude the impact of tax changes, should hold steady, just under 3%."