Canadian Inflation Rate Unexpectedly Eases

The headline inflation rate in Canada eased to 2.3% in January of 2026 from the three-month high of 2.4% in the previous period, slightly under market expectations that it would hold at 2.4%. The result was loosely aligned with the Bank of Canada's projection that the inflation rate would be near the 2.5% mark at the start of the year before treading below the 2% target, as base effects from the GST/HST break in January of 2025 continued to impact annual inflation rates. Deflation picked up for transportation (-17% vs -0.5% in December) due to the 16.7% plunge in gasoline prices. Inflation slowed for shelter (1.7% vs 2.1%) and household operations and furnishings (2.5% vs 3.6%). In turn, prices accelerated for food (7.3% vs 6.2%) due to breaks from the tax regimes, especially lifting prices of food from restaurants (12.3%). Meanwhile, the trimmed-mean core rate fell to 2.4% from 2.7%, well under expectations of 2.6%, for the lowest since April 2021.

The headline inflation rate in Canada rose to 2.4% in December of 2025 from 2.2% in the previous month, the highest in three months, and firmly above market expectations that the rate would remain unchanged. The result contrasted slightly with the Bank of Canada's expectations that CPI inflation would remain around the 2% threshold in the near-term. The acceleration reflected base effects from the temporary GST and HST break introduced in December 2024, triggering higher inflation rates for food purchased from restaurants (8.5% vs 3.3% in November), alcoholic beverages from stores (5.6% vs 3%), and toys, games, and hobby supplies (7.5% vs -0.5%). Meanwhile, inflation eased for shelter (2.1% vs 2.3%) and prices fell for transportation (-0.5% vs 0.7%). Consequently, the median core inflation rate, which is closely monitored by the BoC as a gauge for underlying price growth, slowed to a one-year low of 2.5%.

The headline inflation rate in Canada held at 2.2% in November of 2025, unchanged from October, below expectations of 2.3%, and still loosely converging toward the 2% threshold in the near term as projected in the Bank of Canada’s baseline scenario. Gasoline prices fell 7.8% year-on-year, easing from the 9.4% decline in October as refinery disruptions pushed prices higher on a monthly basis. Food inflation reaccelerated, with prices for food purchased from stores rising 4.7% from a year earlier, the fastest pace since late 2023, driven by higher prices for fresh fruit and other food preparations. Price growth also eased for shelter, as rent inflation slowed to 4.7% from 5.2% in October. In the meantime, cellular service prices jumped 12.7% year-on-year, extending their rebound amid fewer industry-wide promotions. Meanwhile, core inflation remained firm at 2.6% for a third consecutive month, underscoring persistent underlying price pressures despite cooling in select service categories.