Canada Inflation Rate

The annual inflation rate in Canada jumped to 2.6% in February of 2025 from 1.9% in the previous month, the highest in eight months, sharply above market expectations of 2.2% and ahead of the Bank of Canada's forecast of 2.5%. The surge was mostly owed to the end of goods and services tax (GST) and harmonized tax (HST) breaks halfway through the period, triggering sharp increases in the price of eligible goods. Consequently, inflation slowed sharply for restaurants (-1.4% vs -5.1% in January) and alcoholic beverages from stores(-1.4% vs -3.6%), driving the food subindex to rebound sharply (1.3% vs -0.6%). Prices also rebounded for clothing and footwear (1.4% vs -1.3%) and accelerated for recreation, education, and reading (3.7% vs 1.9%). From the previous month, the end of tax credits drove the CPI to jump 1.1%, the most since May 2022.

The annual inflation rate inched higher to 1.9% in January of 2025 from 1.8% in the previous month, in line with market expectations. With the result, inflation remained at or below the Bank of Canada’s midpoint target of 2% for the sixth consecutive month, backing expectations that the central bank is likely to continue its loosening cycle. Inflation rose sharply for transportation (3.4% vs 2.3% in December 2024) as higher prices for oil and natural gas drove consumer gasoline costs to surge by 8.6% (vs 3.5%). Also, prices rose for passenger vehicles (0.4%) for their first annual increase in eight months. On the other hand, inflation remained unchanged for shelter (at 4.5%) and prices fell for food (-0.6% vs 0.6%) due to tax cuts on the sector. In the meantime, BoC core measures of the median and trimmed-mean rates were both at 2.7%, above their expectations. From the previous month, Canadian consumer prices edged higher by 0.1%.

The annual inflation rate in Canada eased to 1.8% in December of 2024 from 1.9% in the previous month, slightly below market expectations that it would remain at 1.9%, to mark the softest rate of price growth since September. With the result, inflation remained within or below the Bank of Canada’s midpoint target 2% for the fifth consecutive month, adding to current expectations of further rate cuts this year. Inflation slowed sharply for food (0.6% vs 2.8% in November), lowered by an annual decline in food purchased from restaurants (-1.6%) due to goods and services tax and harmonized sales tax breaks. Inflation also slowed for shelter (4.5% vs 4.6%) amid softer price growth for rent (7.2% vs 7.7%) and mortgage interest costs (11.7%, the lowest since October 2022). On the other hand, transportation costs accelerated (2.3% vs 1.1%) as base effects drove gasoline inflation to soar (3.5% vs -0.5%). From the previous month, Canadian consumer prices fell by 0.4%.