-- The Canadian government on Tuesday announced that it will suspend the excise tax on gasoline/diesel starting next Monday and running through Sept. 7 -- in other words, the entirety of the summer driving season, said Bank of Montreal (BMO).
This will shave 10 cents per liter from retail gasoline prices, which have been on a "wild ride," noted the bank.
The conflict in Iran lifted global oil prices and, as a consequence, Canadian pump prices by roughly 30%, pointed out BMO.
That follows the April 2025 removal of the consumer carbon tax, which cut the price by about 17 cents per liter.
While the latter pulled down headline inflation, the favorable year-ago comparison will disappear in April, lifting the rate again, stated the bank.
BMO judges that the new government measure will then trim headline inflation by about 0.2 percentage point, leaving annual inflation for 2026 right at 3.0%.
This measure will also cost Canada a reported $2.4 billion, but there appears to be ample room to roll it out without compromising budget forecasts for the deficit, according to the bank.