Don't expect a 2022-style inflation surge despite oil crisis, says RBC
Rising oil prices linked to the Middle East conflict are pushing headline inflation forecasts higher in Canada and the United States. Still, economists at RBC say a repeat of the sweeping inflation seen in 2022 remains unlikely this year.
RBC Economics released its monthly forecast update on Monday, revising headline consumer price index (CPI) projections upward for both countries while leaving core inflation, gross domestic product (GDP), and unemployment forecasts largely unchanged from March.
Headline inflation in Canada is now expected to peak at 3% in the second quarter, up from 2.2% in the first quarter. In the United States, the peak is forecast at 3.7%, compared with 2.7% in the first quarter. By year-end, RBC expects inflation to ease to 2.4% in Canada and 3% in the United States.
A concentrated shock
The report, authored by RBC senior economist Claire Fan, draws comparisons between the current energy disruption and the commodity surge that followed Russia’s invasion of Ukraine in 2022. In both cases, global commodity prices climbed sharply as energy and fertilizer supplies were disrupted, raising fears of stagflation.
However, RBC said the current shock differs in important ways. The disruption is more narrowly focused on oil. According to US Energy Information Administration estimates cited in the report, crude oil shut-ins from Middle Eastern producers reached about 7.5 million barrels per day in March, with the figure potentially rising to 9.1 million barrels per day in April, as transit through the Strait of Hormuz was essentially halted.
In 2022, sanctioned Russian oil was redirected to Asian markets, leaving global supply relatively intact. Global oil production rose by 3.7 million barrels per day that year despite the ongoing war.
Supply chains more resilient
RBC also pointed to the condition of global supply chains as a key difference from four years ago. By the end of 2021, global container costs had quintupled as pandemic lockdowns compounded inflationary pressures. Today, most major global shipping routes have not experienced direct disruption, with impacts largely confined to tanker costs and transportation near the Persian Gulf.
“Overall, we see little evidence of a return to the broad-based supply chain disruption that drove global inflation in 2021–2022,” the report said.
Central banks to hold steady
The Bank of Canada held its overnight rate at 2.25% in March. RBC maintained its forecast for both the Bank of Canada and the US Federal Reserve to keep interest rates unchanged through the end of 2026.
Bank of Canada governor Tiff Macklem said the immediate rise in energy prices will be “looked through” by the central bank, but warned this approach would not apply if inflation broadens and persists. Macklem has also cautioned that unanchored inflation expectations could allow elevated inflation to become entrenched.
Tariffs, trade in focus
The report also noted adjustments to US Section 232 tariffs on industrial metals, including a tiered system that leaves a 50% tariff on some steel, aluminum, and copper products, while applying a flat 25% rate on certain derivative goods. New pharmaceutical tariffs set for later this summer were noted to exempt generic drug imports, which accounted for 79% of US drug imports from Canada in 2022 and 2023.
US customs duties collected totalled US$25.1 billion in March, down 12% from February and 27% below the peak reached in October 2025, signalling continued moderation in tariff revenues.
Source CMP
Jonalyn Cueto
