Canada’s inflation rate rose to 2.8 per cent in April as higher energy prices caused by the war in Iran continue to drive up fuel prices, Statistics Canada said Tuesday.

Inflation accelerated from the 2.4 per cent reported in March and marked the highest rate since May 2024, when headline inflation was 2.9 per cent.

However, April’s inflation rate was slightly lower than the Bank of Canada ‘s expectations. The central bank projected inflation to peak at three per cent in April before gradually returning to the two per cent target in early 2027 in its most recent Monetary Policy Report.

The price of food purchased from stores rose by 3.8 per cent on a yearly basis in April, down from 4.4 per cent in March. Statistics Canada officials said prices for meat and fresh vegetables decelerated slightly, while prices for coffee and confectionaries rose more quickly.

Higher fuel costs also affected the cost of transportation — up 7.6 per cent year-over-year in April — and helped drive overall inflation higher.

Clothing and footwear prices rose by two per cent on an annual basis in April — led by higher prices in women’s clothing — while shelter costs rose by 1.8 per cent during the same time period.

• U.S. inflation accelerates as gas, rent and food prices climb
• The straight line running from Hormuz to Canada's housing market

British Columbia was the only province where consumer prices didn’t accelerate month-over-month, increasing by 2.5 per cent in April, the same rate as in March.

The closing of the Strait of Hormuz has been called one of the largest oil supply shocks in history, leaving some to wonder why prices aren’t even higher than they are.

“It’s a question that we are often asked,” Art Woo, a senior economist at Bank of Montreal , said in a note on May 15.

The United States-Israel war on Iran stranded about 20 million barrels per day of oil and oil-related products due to the closure of the Strait of Hormuz. Oil prices initially jumped, but have since held around US$100 per barrel.

There are a few reasons why people have so far been spared an even worse hit to their pocketbooks, though economists aren’t convinced the pain is contained.

Woo estimated three-quarters of the stranded barrels are crude oil, while the rest are crude-oil products such as diesel and jet fuel .

Faced with a bottleneck in the strait, Saudi Arabia and the United Arab Emirates have increased flows through pipelines they operate by about six million barrels per day, leaving the rest of the world to account for the remainder of the shortfall.

Supplies are being drawn from the sovereign petroleum reserve and countries such as Canada, Norway and Venezuela have increased production, Woo said.

Elevated prices, especially in countries that depend on the Middle East for their energy supplies, have also led to demand destruction, the economist said.

For example, some Asian and African countries have resorted to purchases of certain products and are dealing with power outages and reduced working hours.

There are other reasons the pain has been relatively contained, National Bank of Canada said, including a world economy that uses less oil per unit of gross domestic product and oil production that, prior to the start of the conflict, outpaced consumption by about four million barrels per day.

National Bank economist Jocelyn Paquet also said the rise in oil prices depends on the duration of the supply shock. In this case, the Iran conflict is still in its early days compared with the Arab oil embargo of the 1970s, which lasted five months.

However, both Woo and Paquet warned uncertainty looms over the outlook and energy prices.

For example, Paquet said she doesn’t think energy markets can count on further production increases.

“Even U.S. shale producers, reputed to be among the most agile and responsive in the world, would likely need three to six months before they could bring additional supply to the market,” she said in a note on May 15.

Absent a resolution to the nearly three-month-old conflict, Paquet predicts the world will continue to depend on governments’ strategic petroleum reserves and commercial reserves to make up for the oil shortfall.

She estimated those two sources have so far contributed 3.2 million and 4.8 million barrels per day, respectively, but said the U.S.’s reserves are on track to fall to their lowest levels since 1982 if the expected “drawdown” takes place.

“Other countries find themselves in a similar situation,” she said, warning that further demand destruction that spreads to Europe could be the only route to bringing energy prices to heel.

For now, other less tangible factors are keeping a lid on oil prices, Woo said.

“We suspect prices are also still being held back by hopes/expectations that the conflict will come to an end and the strait will reopen relatively soon,” he said.

He said he thinks Donald Trump will likely want Americans to be paying less at the pump in the run-up to the U.S. midterm elections in November.

At the moment, oil market futures predict West Texas Intermediate (WTI) will fall to US$80 per barrel by December, compared with US$105 as of May 15.

“Still, we can’t help but wonder if such a view may be slightly too optimistic,” Woo said.

• Posthaste: Why the chances of a Canadian housing market rebound in 2026 have 'slipped away'

Sign up here to get Posthaste delivered straight to your inbox.

International investors remained a “critical part” of the purchase of government of Canada bonds, according to economists at National Bank of Canada, following the release of Canada’s international transactions in securities for March.

Foreign investors’ ownership share of government of Canada bonds rose to a new monthly record in March of 40.9 per cent, Warren Lovely, Taylor Schleich and Ethan Currie said in a note on May 15, adding that during fiscal year 2025-26, foreign investors expanded their holdings by more than $60 billion.

“This is a non-trivial buying pace, equivalent to nearly two per cent of GDP on an annualized basis,” they said.

• Today’s data: Canada consumer price index for April, building permits for March, U.S. pending home sales
• Earnings: Home Depot Inc., Toll Brothers Inc.

• Being sold private investments as a ‘hot deal’? Make sure it’s not too good to be true
• Big Six bank valuations at all-time high, raising bar for earnings season
• Canada needs transparent, consistent energy policies to attract investment

The tax-free savings account is a no-brainer for millions of Canadians looking to save money. The rules are seemingly straightforward: You make after-tax contributions annually within your contribution limit, the funds are invested tax-free, potentially forever, and if you withdraw them, or you die, they also come out tax-free. What can possibly go wrong? Apparently, for some taxpayers, quite a bit. Keep reading here to find out.

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors. Sign up here.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here

A group of retired employees of Queen’s University in Kingston, Ont., say the transition of their pension to the new University Pension Plan mega fund has left them feeling shortchanged in the face of rising inflation .

Queen’s was one of three universities to fold their retirement funds into the newly created and professionally managed multi-employer fund that was launched in 2021 amid concern over the sustainability of university pensions in Ontario.

The intent of joining the UPP was to address funding shortfalls, maintain defined benefit pension plans that guaranteed payouts for retirees, and tap into the benefits of investing at scale .

But the retirees say the Queen’s pension’s indexation formula — which was tied to performance and maintained after the merger — did not mesh with UPP’s investment style, leading to stagnating payouts in recent years.

“Significant concerns have been expressed by RAQ (Retirees Association of Queen’s) members following receipt of the 2025 pension adjustment letters that showed that UPP investments delivered a very disappointing three per cent net fund return for 2024/25,” the co-chairs of the association’s pension and benefits committee wrote in a spring 2026 newsletter viewed by the Financial Post.

“Since 2021, when management of our pensions was assumed by the University Pension Plan (UPP), little or no increase in pensions has been seen.”

Not all pension payouts are indexed to help keep up with inflation, but Queen’s had a formula for conditional indexation that was brought over to UPP for those employees and retirees. The formula is based on investment performance and provides for an increase to a retiree’s base pension if an average return target is met over a rolling four or six year period, depending on when the individual retired.

A strategy of investing of investing heavily in public equities meant the target was met much of the time as stock markets roared ahead for much of the past quarter century — with the exception of 2008 financial crisis. As a result, Queen’s retirees received additional payouts for many years with their standalone pension.

However, under UPP, the fund’s investments shifted to include private assets such as infrastructure and real estate. That transition to a more diversified portfolio aimed at weathering a range of market conditions while mitigating risk has also come with a choppier path of gains and losses since 2021, including a 9.1 per cent net loss in 2022.

Fed into the performance-based formula, those figures have meant former Queen’s employee Gordon Crawley has received no increases since he retired in November 2021. Meanwhile, the consumer price index (CPI) has risen by more than 16 per cent over that time frame, according to Bank of Canada data.

Crawley worked as an operating engineer in the central heating plant at Queen’s until he retired the same year UPP was launched after 37 years with the university. He says it’s been difficult, especially knowing he won’t get any additional payments to top up his pension and help deal with inflation until the fund’s returns have made up for lost ground.

A UPP statement he received says that any shortfall for years when the return is calculated at less than the target level of six per cent has to be made up by future returns before new increases can happen.

“I am very concerned about the future, so concerned that I have had to have serious discussions with my children about the possibility of selling my house and moving in with them,” he said.

“With inflation rising every year and my pension staying stagnant, my financial security is waning…. I am concerned about being able to continue taking care of my financial responsibilities and my family.”

Inflation has taken a couple of notable upward swings in recent years. After the COVID-19 pandemic in 2020, countries including Canada experienced a spike in inflation that was expected to be short-lived but persisted, causing central banks to raise interest rates. Food prices have also continued to rise in Canada, putting a strain on some households, while the war in the Middle East that began in late February caused oil prices to soar, which has caused inflation to rise again.

“We recognize that periods with little or no increases, particularly in a higher inflation environment, can be challenging for retirees,” a spokesperson for UPP said, noting that it has always been a feature of the Queen’s pension that increases are not directly tied to inflation and can vary year to year.

She said the structure also ensures that pensions being paid out don’t decrease, and added that the return-based indexation formula used by Queen’s can deliver materially higher increases in periods of low inflation than calculations based on the CPI, which are used by UPP and its other participating universities.

“While CPI-based indexation may appear more favourable in periods of higher inflation, the inverse has also been true,” she said.

Michelle Lewis, director of media relations and issues at Queen’s, responded to questions about the indexation formula and whether changing it is under consideration with an emailed statement that said the university “remains engaged” with the University Pension Plan.

“(This involves) ongoing dialogue to better understand its long-term investment strategy and how it supports the interests of its members, including those from Queen’s,” she wrote.

The choppier returns haven’t had the same impact on conditional indexation for UPP members from the universities other than Queen’s because their formulas — also kept in place after the merger with UPP — are based on the consumer price index (CPI) rather than the pension fund’s performance. And any pension benefits accrued since UPP was formed are subject that same CPI-based formula, even for Queen’s employees.

The creation of the multi-employer UPP — initially with Queen’s, the University of Toronto and Guelph University and later expanded to include six post-secondary institutions and others in the sector, with total membership exceeding 44,000 — was promoted by Queen’s in 2021 as a way to address the financial challenges facing university pension plans that would allow employees to keep defined benefit pensions. At the same time, proponents said cost-savings and investment opportunities would come with scale and professional management in addition to advantages like increased career flexibility and pension portability.

Another selling point was that employees and employers would share responsibility for decision-making about the terms and conditions of the plan going forward.

Kenneth Kroner, a veteran investment professional and former acting chair of Alberta Investment Management Corp. (AIMCo), said pensions that can invest and manage funds at scale generally deliver better security for pensioners. Moreover, using conditional indexation formulas based on fund performance has some merit because it ensures payouts aren’t made if returns aren’t there to back them.

• Government reinsurance fund could lower insurance rates as natural disasters rise
• The straight line running from Hormuz to Canada's housing market

“Supporters probably argue that protecting the endowment is good for future retirees, and therefore best in the long run,” he said, adding that this line of thinking holds up even if when it comes at the expense of current retirees as Queen’s is experiencing.

But he said there is also a case to be made for changing the CPI-based indexation formula used by UPP and the universities other than Queen’s because if the pension pays current retirees higher benefits than the fund is able to afford, it will only create future problems.

“One formula — Queen’s’ — bases increases only on the ability of the fund to pay, while the other formula — CPI — bases increases only on the needs of the beneficiaries,” he said. “But my view is that both should be considered in the formula. So if I were ‘king for a day,’ I’d be changing both formulas.”

• Email: bshecter@nationalpost.com

This week FP Video looks the impact the on-again-paused-again United States-Iran war is having on global markets and government bonds , a look behind the scenes at what it takes to keep WestJet flying, the Canadian Cattle Association’s beef with the Mercosur-bloc South American trade deal .

Bond market today is a ‘troubling place’

Som Seif, chief executive of Purpose Investments, talks with Financial Post’s Larysa Harapyn about how markets are reacting to the Iran war, China and U.S. relations and the biggest threats on the horizon.

How the Mercosur deal could undermine Canada’s beef industry

Tyler Fulton, president of the Canadian Cattle Association, talks about the risks of a South American trade deal to cattle producers in Canada and to Canadian consumers.

Inside WestJet’s Calgary maintenance hub

WestJet chief executive Alexis von Hoensbroech gives Financial Post an exclusive look behind the scenes of what it takes to keep a fleet of planes flying.

• Ottawa, Alberta pact under pressure over fine print. FP Video explains
• Where the Bank of Canada, oil prices and your grocery bill go from here: FP Video

During his summit with U.S. President Donald Trump in Beijing on Thursday, Chinese President Xi Jingping posed a question: “Can China and the United States transcend the so-called ‘Thucydides trap?’ and forge a new paradigm for major-power relations?” It was the second prominent reference to the ancient Greek general and historian made by a world leader this year, the first being by Prime Minister Mark Carney during his speech at Davos in January. So, why is Thucydides having a political moment, and what makes his writing relevant today?

Who was Thucydides?

Thucydides was a Greek general and historian known for penning the “History of the Peloponnesian War,” an account of the conflict between Sparta and Athens — the two dominant powers of Ancient Greece — that lasted from 431 to 404 BCE.

As a general during the early part of the war, Thucydides was an eyewitness to many events and his writing stands out for being more of a “logical analysis” compared to other writing from the time that leaned on storytelling and mythology, said Michael Carter, a professor in the department of classics and archaeology at Brock University in St. Catharines, Ont.

“It’s very rational, almost scientific in a way,” said Carter. “And in many ways, I would say he’s the first real modern Western historian.”

While the “History of the Peloponnesian War” is considered a foundational work, the man who wrote it is more mysterious. What little is known about Thucydides’ personal life is in his book and, for reasons unknown, his account of the war ends mid-sentence in 411 BCE.

What did Xi say about Thucydides?

During the summit on Thursday, President Xi posed a series of questions to President Trump about future relations between their two countries, including the one referencing the ‘Thucydides trap.’

The term ‘Thucydides trap’ was popularized by political scientist Graham Allison in “Destined for War,” his 2017 book about China–U.S. relations. It the idea that conflict is the likely outcome when a rising power threatens to challenge a ruling one (in the 16 historical examples Allison cites, only four avoid it).

The theory is derived from a line in the “History of the Peloponnesian War”: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable,” according to a common translation.

“That’s what Graham Allison’s argument is, that the United States is the hegemon or the leader of the world and then there’s China as a rapidly rising power,” Carter said. “And at one point, something is going to happen and there’s going to be a break.”

In response to his own questions, Xi said the two leaders would have to answer them together.

What did Carney say?

In his speech to the World Economic Forum in Davos in January, Carney also referenced a Thucydides quote.

“It seems that every day we’re reminded that we live in an era of great power rivalry, that the rules-based order is fading, that the strong can do what they can, and the weak must suffer what they must,” Carney said in his remarks.

The line about the strong and weak comes from the Melian dialogue portion of Thucydides’ book and describes the Athenians’ capture of the strategically important island of Melos.

In discussions between the two sides’ leaders, Carter said the Melians’ arguments for why it was unjust to attack an independent state centered around ethics, morality and justice. This didn’t sway their invaders — when the Melians resisted, the Athenians killed all the men and enslaved the women and children.

“What the Athenians are saying to the Melians at this point is, ‘it’s nothing personal. We’re stronger than you and big fish eat little fish, and if you don’t put on your big boy pants and join our empire, we’ll destroy you,’” Carter said.

Why is the ancient historian being referenced now?

Carter said Thucydides is considered the “guiding light” of political realism, the philosophy that states operate out of self-interest and the pursuit of power, not morals or ethics.

In his Davos speech, Carney said Thucydides’ aphorism about the strong and the weak is presented as “inevitable” or the “natural logic” of international relations. But compliance won’t buy safety, he said, urging middle power countries to build strategic autonomy and stating that Canada would pursue a “values-based realism” approach to foreign policy.

Carter said Thucydides’ quote is sometimes misunderstood as an endorsement rather than a historian’s observation about the attitude that led to the decline of a great city-state, which was ultimately defeated by Sparta.

“I think what Thucydides is describing here is the tragedy of Athens and the foreshadowing of the destruction of Athens,” he said.

Carter said the conflict between Sparta and Athens endures as a template for the theory of clashes between great powers because it represents a key theme that historians see repeated: a dominant power challenged by a rising one.

“The remarkable thing is Thucydides knew that, because he understood human nature,” said Carter. “And that’s one of the very first things he says in the book is that, ‘I’m writing this as an example, for all time, because people don’t change, and this will happen again.’”

• Xi tells U.S. CEOs on Trump visit that China will open up more
• The new world order will be more dangerous and more cooperative

A housing market rebound in 2026 is unlikely based on the latest numbers released Thursday by the Canadian Real Estate Association (CREA), say economists.

“Expectations for a marked recovery in Canadian housing activity have been dialed back again,” Douglas Porter, chief economist at Bank of Montreal, said in a note.

April sales rose 0.7 per cent from the month before, but he said “no one is going to mistake that for a sign of spring for the chilly housing market,” given that sales remain four per cent below year-ago levels and 10 per cent off of the norm for this time of the year.

Prices are also down four per cent from a year ago and 20.5 per cent off the pandemic peak in February 2022.

“At this point in the year, the chance for a full-blown housing rebound has likely slipped away,” Clay Jarvis, who covers mortgages at NerdWallet Canada, said in a note.

Toronto-Dominion economist Rishi Sondhi was a little more optimistic about the CREA numbers since Ontario posted a “solid” sales gain of 4.3 per cent month over month and the average home price across Canada rose 2.6 per cent in April from March.

He said the slight drop in the sales-to-new-listings ratio “is well below the long-term average and signals modest price growth moving forward.”

TD is calling for an increase in prices and sales for the second quarter, but Sondhi said that won’t be enough to pull the market out of its overall slump.

“This will likely only partially retrace significant first-quarter weakness, leaving an overall subdued picture for the first half of the year,” he said.

Sondhi also said the once-hot housing market faces plenty of economic headwinds, including weak population growth, elevated supply in key markets and a “shaky” jobs picture.

But Porter said the current sales-to-new-listings ratio points to a further contraction in prices and indicates “little prospect for a quick turn anytime soon.”

He said further price decreases are needed to improve affordability, which remains far below historical norms despite recent price declines and a drop in interest rates.

On a provincial basis, Ontario and British Columbia, the country’s housing heavy hitters for prices and sales, had been the biggest drags on the overall market, but other “once-solid” regions are showing signs of cooling, the CREA report said.

For example, sales dropped by double digits in Edmonton, Winnipeg and Halifax, while previously “sizzling” Calgary posted a nearly 10 per cent drop in sales and a decline in its home price index.

“Given the lingering affordability issues in many regions of the country, and the now-distant prospect of any further rate cuts by the Bank of Canada, it’s tough to see the market springing to life anytime soon,” Porter said.

• Posthaste: Canadian travel to the U.S. rises for the first time since Trump 2.0. So is the boycott thawing?
• Posthaste: How remote work, pickleball and AI are changing commercial real estate

Sign up here to get Posthaste delivered straight to your inbox.

• Governor General Mary Simon will invest six officers and eight Members into the Order of Canada during a ceremony at Rideau Hall in Ottawa
• Today’s data: Canada housing starts, international securities transactions and manufacturing sales
• Earnings: HLS Therapeutics Inc., Conifex Timber Inc.

• Honda suspends Ontario EV plant ‘indefinitely’ after posting first-ever loss
• Insurance system leaves Canadians vulnerable as natural disasters rise, says report
• With stock markets near record highs, why would an investor worry?
• Who is incoming U.S. Federal Reserve chair Kevin Warsh and what will his tenure mean for Canada?

This FP reader, one of two children, moved out of his parents’ home after getting married, but his brother continues to live there. Now he is worried that once his parents die, he won’t be able to collect his portion of the inheritance from the sale of the family home. Keep reading here to find out more.

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors. Sign up here.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here

As Kevin Warsh steps into his new job as chair of the U.S. Federal Reserve this week, he’ll be heading up an institution dealing with stubborn inflation , pressure from U.S. President Donald Trump to cut interest rates and growing debate over how artificial intelligence is reshaping the economy. A former Wall Street banker, White House advisor and Fed governor, Warsh says he wants to bring a policy “regime change” to the central bank. Here, the Financial Post looks at his career, his views on Fed independence and what his appointment might mean to Canada.

Who is Kevin Warsh?

A graduate of Stanford University and Harvard Law School, Warsh started his career in investment banking at Morgan Stanley in the 1990s and held several key economic and financial advisory roles in the George W. Bush administration in the early 2000s.

At 35 years old, Warsh became the Fed’s youngest-ever governor when he joined the central bank in 2006. His background in finance came in handy during the 2008 financial crisis, connecting policymakers with Wall Street and helping the Fed interpret rapidly changing market conditions.

Warsh was considered an “inflation hawk” during his first stint at the Fed, focused on keeping inflation low and wary of aggressive rate cuts and the Fed’s quantitative easing policies.

After leaving the central bank in 2011, Warsh joined the Stanford Graduate School of Business as a lecturer and is a distinguished visiting fellow in economics at the Hoover Institution, a public policy think-tank at Stanford. He’s also a partner at the New York-based Duquesne Family Office, founded by famed billionaire investor Stanley Druckenmiller.

When Trump announced his pick for Fed chair on Jan. 30, the news wasn’t much of a surprise — Warsh has been on the president’s radar for nearly a decade. He was in the running to replace former chair Janet Yellen in 2017 (the job ultimately went to Jerome Powell) and was also reportedly considered by Trump for treasury secretary.

Warsh is married to Jane Lauder, a granddaughter of beauty mogul Estée Lauder who worked at her family’s company until 2024 and remains on its board of directors. Financial disclosure documents tied to his confirmation suggested Warsh had well in excess of US$100 million in assets, while Forbes lists his wife’s fortune at more than US$2 billion.

What is Warsh’s agenda for the Fed?

The 112-year-old Fed needs a policy “regime change,” Warsh said at his U.S. Senate confirmation hearing on April 21.

While hawkish in the past, Warsh has said recently that lower rates could be justified. In November, he argued in a Wall Street Journal op-ed that artificial intelligence will be a “significant disinflationary force” that boosts productivity. He also said inflation is a “choice” and happens “when government spends too much and prints too much.”

At his confirmation hearing, Warsh said one of the “essential elements” of new Fed policy will be to “get access to better data and to dig deeper into the productivity possibilities that can come out of this new investment wave.”

Warsh also the central bank needs a new framework for evaluating inflation and said he wants to “slowly and deliberatively” reduce the Fed’s balance sheet, which has grown from less than US$1 trillion in mid-2008 to US$6.7 trillion as of early May.

Reforming the century-old institution won’t be easy. The Fed’s open market committee that sets monetary policy isn’t a “one-man band” but a board of 12 voting members that makes decisions collectively, said Timothy Lane, former deputy governor of the Bank of Canada and senior fellow at the Centre for International Governance Innovation.

“The chair has a lot of influence automatically just by being chair, but that’s not enough by itself,” he said. “There’s a need to win over other people to his way of seeing things, and that’s something that could take a little bit of time.”

Where will Warsh go on rates?

Trump has repeatedly called for outgoing Fed chair Jerome Powell to keep interest rates low. When asked by a CNBC reporter in April if he would be “disappointed” if Warsh didn’t cut rates right away, Trump agreed that he would be.

Facing questioning from senators about pressures from Trump and the Fed’s independence, Warsh said he would be an “independent actor” if confirmed and said the president never asked him to “predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so.”

The Fed’s next interest rate announcement is on June 17, and traders are pricing in a 98 per cent chance that the Fed will hold its target rate at 3.5 per cent to 3.75 per cent, according to the CME FedWatch tool.

“Almost any way they measure interest rate probabilities, there’s a very low chance of a cut anytime this year priced into the market at this point,” said Douglas Porter, chief economist at Bank of Montreal. “In fact, when you get into next year, the market is starting to price up rate hikes in 2027.”

Warsh’s first press conference after the June rate announcement will provide some “flavour” as to his intentions, said Paul Beaudry, former deputy governor of the Bank of Canada and professor at the Vancouver School of Economics at the University of British Columbia.

“His first speech after the decision will be quite revealing as to how he’s interpreting things, how he views things and what kind of messages he puts out,” said Beaudry.

What are Warsh’s connections to Mark Carney?

Warsh isn’t a stranger to Mark Carney . The two are professional acquaintances, as Warsh’s time at the Fed overlapped with Carney’s time as the governor of the Bank of Canada from 2008-2013.

When Carney was governor of the Bank of England in 2014, it hired Warsh to review its communications around interest rate decisions, with a view to improving transparency.

After Trump announced Warsh’s nomination in January, Carney said in a social media post Warsh is a “fantastic choice to lead the world’s most important central bank at this crucial time.”

Warsh has also worked with Bank of Canada governor Tiff Macklem , who took up the post in 2020 and was previously the central bank’s senior deputy governor from 2010-2014 and deputy governor from 2004-2007.

A Bank of Canada spokesperson said Macklem was unavailable for comment. When asked about Warsh’s nomination during a fireside chat at the Empire Club of Canada in Toronto on Feb. 5, Macklem said he welcomed it and noted that the two “worked closely” with then-chair Ben Bernanke during Warsh’s first stint at the Fed.

“Kevin is a very experienced central banker. He has deep knowledge of financial markets and the international monetary system,” Macklem said. “I am looking forward to working with Kevin as chair.”

What does Warsh’s appointment mean for Canada?

While the Fed and the Bank of Canada are separate entities in different countries with their own mandates, Beaudry said the two central banks have close ties and exchange information.

Because the two countries’ economies are highly integrated, Beaudry said it’s much easier when the Fed and Bank of Canada have similar goals and see problems the same way. He gave a hypothetical example of the Fed breaking from the two per cent inflation target it shares with Canada and raising it to three per cent.

“Where would things be difficult is if one country kind of follows a different policy from the other,” he said. “That’s certainly fine, there’s no problem with that idea, it’s just that the implementation of the transition could be difficult.”

If Warsh moves quickly to shrink the Fed’s balance sheet, Beaudry said it could create a “tension” that pushes up longer term interest rates in the U.S., which would also be felt in Canada.

“As we know in Canada, the real one that really matters for a lot of people is the five-year rate, given how mortgages are structured,” he said. “For businesses, 10-year rates are important also.”

Porter said the Bank of Canada will likely be watching with great interest to see if AI advances help boost productivity in the U.S. and whether that suppresses inflation.

He said it’s always good news for Canada when the American economy is doing well, and a productivity boom in the U.S. would could secondary benefits.

“I actually do believe that Canada could stand to benefit a bit ourselves from our productivity, from the AI built out,” he said. “I just think it will probably be a little bit more evident in the U.S. than in Canada.”

• Central bankers are like captains of supertankers — a lot rides on their ability to see ahead
• What Bank of Canada's Macklem and Fed-nominee Warsh get wrong about productivity and interest rates, says Desjardins

• Email: jswitzer@postmedia.com

Canadian Tire Corp. Ltd. ‘s consolidated sales were down one per cent in the first quarter, due in part to the extended winter in most of the country, the company said Thursday.

Comparable sales at Canadian Tire retail stores dropped 2.3 per cent in the quarter ended April 4, with seasonal and gardening categories leading the weather-related decline, while fixing categories grew.

“Unfortunately, the seemingly endless Q1 winter clearly delayed the warmer weather and the inevitable sales it brings,” chief executive Greg Hicks told analysts during Thursday’s earnings call. “Like our customers, we have been patiently awaiting spring.”

Hicks said the seasons also didn’t line up neatly with the company’s quarterly reporting dates.

The first week of the quarter was negatively affected by strong winter sales having been pulled into last year’s 53rd week, while sales in the final week of the first quarter were negatively affected by a delayed spring compared to strong sales last year, he said. Absent these factors, overall comparable sales would have been positive, Hicks added.

Western Canada, which had better weather than most of the country, outperformed, while seasonal weakness affected sales in Ontario and Quebec, he said.

Active wear and casual wear retailers SportChek and Mark’s had continued sales growth, up 3.3 per cent and 1.2 per cent respectively, raising retail revenue as the company “positioned the business for spring demand,” Hicks said.

Canadian Tire’s consolidated revenue grew by 3.3 per cent to $3.57 billion in the quarter. Retail revenue grew 2.9 per cent, and five per cent if excluding petroleum.

The retailer’s loyalty sales outpaced non-loyalty sales, reflecting growth in active Triangle Rewards members, including increasing contributions from partnerships launched with Royal Bank of Canada and WestJet in the quarter.

The company is also watching how consumers respond to economic volatility, said Hicks.

“Similar to our comments at the end of 2025, we see a Canadian customer that is resilient but discerning,” he said. “In the face of macroeconomic confusion, they have their chin up and their eyes wide open.”

The CEO said that even with strained budgets, customers are still shopping, but they are more selective and value driven.

Hicks said the company’s Triangle credit card data shows significant increases in household spending at the gas pump, which he said is no surprise, but has their attention.

He said that as customers search for value, the retailer has lowered prices on some products in response.

“(As) discerning customers move to value, we, too, are moving to value with a highly relevant and highly measured approach,” he said. “For example, in Q1 when customers traditionally prioritize life’s essential products, we lowered thousands of prices for Canadians.”

He added that the company “remains value-focused heading into spring.” This includes prioritizing products priced below $50, which account for more than half of its sales. It also plans to add thousands of SKUs.

Online sales and clearance alone drove about $5 million in incremental sales in the first quarter, creating a clear picture of customers bias for value, said Hicks. Spend per basket at Canadian Tire stores was up despite fewer units and more deeply discounted items, he said.

The gap between essential and discretionary sales performance is narrowing, he added.

Canadian Tire data reveal that its lowest income, highest-debt customers are driving the most robust sales growth, “as counterintuitive as it may seem,” he said.

“I think one of the biggest surprises that we have is what we’re continuing to see from a spend standpoint for high indebted households,” he said.

Hicks said the company has the greatest amount of data on registered Triangle members, which they segment into different groups: “from affluent all the way down to thrifty.”

Triangle Mastercard holders are paying their balances “at levels we describe as stable or healthy,” he said, and overall, Triangle member visits and sales significantly outpaced that of non-loyalty.

He said that with those engaged Triangle members, the company is seeing trips increased, baskets steady and a little bit of softness in units per basket.

That data is based on the loyalty program’s 7.5 to eight million members, not from every customer that comes through the stores, said TJ Flood, chief operating officer.

“There continues to be a little bit of separation to the positive in terms of that really thrifty customer that has high debt burden,” said Flood. “If thrifty customers are growing their spend with us at more than 10 per cent, more than double digit, they have to be spending 10 per cent everywhere else for us not to be taking their share.”

• Dunkin' Donuts to open hundreds of locations across Canada
• Aritzia reports record revenue in fourth quarter, hits 2027 target a year early

• Email: dpaglinawan@postmedia.com

The benefits of artificial intelligence are starting to show up in Canada’s economic and productivity data, but the technology brings with it risks and challenges, too, one of the Bank of Canada ‘s external deputy governors told a conference in Ottawa this week.

In a speech to the Canadian Association of Business Economics’ 2026 Spring Policy Conference on Wednesday, Michelle Alexopoulos said that while the use of AI is currently concentrated to a few sectors such as finance and insurance, the central bank is starting to see evidence of small productivity gains from the technology.

The central bank’s first-quarter Canadian Survey on Consumer Expectations, for example, found more than 30 per cent of respondents said they use AI to generate and edit content at work, while almost 25 per cent said they use the technology to analyze data, code or conduct research. A little more than 20 per cent of respondents said they use AI to automate work.

The central bank’s most recent Financial Systems Survey, which gauged experts in risk management in the financial sector, also found AI was being used to automate routine tasks which freed time for workers to focus on “higher-value” ones.

“To put it simply, the Bank of Canada cares about AI because of its potential to significantly affect productivity, economic growth, employment and inflation,” Alexopoulos said. “When productivity improves, living standards rise.”

Any improvement in Canada’s economic productivity would be welcome by economists. Productivity has been lagging for the past 25 years, with annual growth reaching three per cent in the 1960s and 1970s before falling to about one per cent between 2000 and 2019.

The declines still persist today. Business labour productivity — a measure of the volume of goods and services produced per hour worked — was up 1.1 per cent year-over-year in 2025, according to data from Statistics Canada.

By comparison, U.S. productivity increased by 2.9 per cent year-over-year in the first quarter of 2026, according to data from the U.S. Bureau of Labour Statistics.

The Bank of Canada has been contemplating the arrival of AI and its economic effects for some time.

In a speech in September 2024, Governor Tiff Macklem first noted the broad enthusiasm for AI and the uncertainty around how the technology would develop.

Since then, AI adoption has been gaining steam. Statistics Canada data from 2025 suggest that 12 per cent of Canadian businesses were using AI, quadrupling from the three per cent in 2022.

Macklem told a House of Commons finance committee meeting on May 4 that the central bank believed AI adoption would be a tailwind for productivity.

“We have revised up our outlook for productivity growth a bit going forward relative to what we had (in January)…. One, the economy is working through an adjustment to higher U.S. tariffs that will temporarily depress productivity growth, and then it comes back,” he said.

“AI is increasingly being deployed by Canadian companies, and our assessment is that it will boost productivity growth going forward.”

Economists, however, say the technology is still so new that it may take a while to see a significant impact on productivity.

Nathan Janzen, an assistant chief economist at the Royal Bank of Canada , said in an interview that AI could help mitigate persistent labour shortages that are driven by an aging population and a low unemployment-to-job-vacancy ratio.

“In that kind of a back drop, you do look for ways to increase production other than adding workers,” he said. “AI investments and productivity growth is the best way that you can do that over time.”

However, he noted Canada’s lagging productivity is also likely tied to weak business investment and a lack of competition, which have been problems for decades.

“Our tax structure, the governance structure of the Canadian economy itself, the regulatory backdrop across different provinces and territories … these are all kinds of structural factors that have been a negative for Canadian productivity growth versus what we’ve seen in the United States,” he noted.

“Those don’t get fixed by just adopting AI.”

Janzen said measures such as cutting red tape, better utilizing immigrant skills, improving tax competitiveness, adopting new technologies and capitalizing on a highly-educated workforce could better improve productivity.

He also noted that AI adoption rates have been “relatively low” in Canada. AI adoption rates in Canada trail behind the U.S., with data from the Census Bureau suggest roughly 18 per cent of businesses reported actively using AI as of year-end 2025.

“It will take time for those investments to pay off in terms of actual productivity growth, but in the longer run, productivity gains come from businesses actually adopting that technology,” Janzen said.

The labour market will also experience restructuring as companies and workers adapt to new technologies.

In her speech, Alexopoulos said there is evidence that demand is already rising for workers with AI skills, but she also acknowledged fears that some jobs will be made redundant by the technology.

“To be sure, some workers are already feeling the effects of AI…. This is a real concern,” Alexopoulos said.

“But, broadly speaking, the evidence does not yet point to widespread worker displacement because of AI.”

Christopher Worswick, a labour economics professor at Carleton University, said in an interview that there may be short-term disruptions to Canada’s labour market. For example, new graduates and students may have problems landing jobs.

“In the medium term, I suspect firms will probably pay higher wages for workers who can work with AI effectively. People who can identify mistakes and inconsistencies and work interactively with multiple AI programs are, realistically, going to be super productive,” the professor said.

Worswick added that, much like the rise of the internet and technological advances in the agricultural sector, adaptation to AI will lead to job creation in the long term.

• AI helped CIBC save 1.2 million hours, cut mortgage approval times at TD, CEOs say
• Why Canada's productivity might not be as terrible as you think

Closing the productivity gap with the U.S. may not be easy.

A report by the Federal Reserve Bank of Dallas suggested that the adoption of AI could boost productivity growth by between 0.3 and 3.0 percentage points a year over the next decade. Canada’s projected growth is slow in comparison — a recent Bank of Canada analytical paper said that, if Canadian businesses continue to adopt AI, the country’s economy could see annual productivity gains ranging from 0.35 percentage points to 1.13 percentage points over the same window.

• Email: ptran@postmedia.com

Impacts of soaring oil prices and the uncertainty surrounding United States tariffs remained top of mind for the Bank of Canada governing council, with some concerned about the uncertainty they pose to Canada’s economic outlook .

A summary of deliberations by the central bank’s governing council — which led to the key overnight rate being held at 2.25 per cent for the fourth time in a row — was released Wednesday. Governing council members expected oil prices to ease and inflation to have peaked at three per cent in April 2026 before gradually returning to the two per cent target in early 2027, according to the document.

Members also predicted that gross domestic product will grow to 1.2 per cent in 2026 before rising to 1.6 per cent in 2027 and 1.7 per cent in 2028, with a gradual rise in exports and business investments driving that growth.

However, that scenario is highly dependent on the persistence of the oil price shock and whether the United States imposes additional tariffs on Canada. If energy prices remain high, inflation could rise further and remain elevated for longer, which could require consecutive increases to the policy interest rate . Furthermore, if the U.S. government imposes significant new trade restrictions, it could weaken activity and push inflation down, which means the policy interest rate might need to be cut further, the council wrote.

“Governing Council agreed that their outlook for growth and inflation in Canada was highly conditional on U.S. tariffs remaining unchanged and on lower oil prices, which would depend on developments in the war in the Middle East,” the summary of deliberations read.

While geopolitical tensions and the trade war informed the discussions, the governing council said the impact could be more limited.

Core inflation showed some downward momentum, even if higher oil prices pushed key inflation to 2.4 per cent in March, and there is no evidence to suggest that higher prices were spreading more broadly to other goods and services, the council said. The economy is also in a position of excess supply, meaning businesses are producing more goods and services than consumers are buying, and inflation has hovered around the central bank’s target of two per cent since summer 2024. This, combined with a soft labour market, means businesses are less likely to pass higher costs to consumers.

The council also said that, despite uncertainty surrounding the upcoming Canadian-U.S.-Mexico Agreement negotiations, businesses reported stronger expectations for sales growth and investment. Businesses also expected the Iran war to raise costs but soft demand was limiting their ability to fully pass on those costs. The central bank’s first-quarter business outlook survey results also suggest business sentiment is improving, rising back to pre-tariff levels.

However, governing council members acknowledged there could be less excess supply than expected, and businesses could pass on higher costs more rapidly during a time when Canadians are more sensitive to price hikes.

Higher energy prices and supply bottlenecks could also create broader cost pressures, with inflation spreading to more goods and services.

• Geopolitical risks trump trade tensions as biggest threat to Canadian economy, Bank of Canada survey finds
• Three central banks just sent Tiff Macklem a message

In the end, the governing council concluded that uncertainty remains “unusually elevated” and the actual outcome for the Canadian economy could reflect a combination of the two shocks — energy prices and tariffs — and other developments.

For now, they said they could look through the initial impact the war in the Middle East had on oil prices and the current policy rate is appropriate to keep inflation close to the two per cent target. But the central bank needs to be prepared to act in the future to prevent broader and persistent inflation, they wrote.

“Governing Council agreed that, depending on what happened, they may need to be nimble in their response to events,” the summary of deliberations said.

• Email: ptran@postmedia.com