According to Statistics Canada, Canada’s yearly inflation rate decreased to 2.3 percent in January, primarily due to a drop in gasoline prices.
Many economists had anticipated that the rate would hold steady at December’s 2.4 percent.
Gas prices exerted downward pressure on the overall rate, having decreased by 16.7 percent in January compared to the same month last year. Excluding gasoline, the inflation rate for January was recorded at three percent.
The Bank of Canada’s preferred core inflation measures, which eliminate the effects of temporary tax changes and gas price fluctuations, all showed a decline in January, bringing these figures closer to the central bank’s target of two percent inflation.
Douglas Porter, chief economist at Bank of Montreal, noted in a client memo, “Overall, this is a positive outcome for the Bank of Canada, as inflation is finally approaching the [two percent] target on a broader scale.”
However, he emphasized that the central bank has indicated that the criteria for reducing the key interest rate are stringent, and monetary policy cannot address supply-related disruptions.
Porter added, “Nevertheless, if inflation continues to decline, the bank might be positioned to support the economy if growth genuinely falters during its structural transition.”
Food inflation growth slows slightly
In January, grocery inflation decreased to 4.8 percent year-over-year, following a rise to five percent in December, as reported by Statistics Canada.
This deceleration in price growth was mainly influenced by lower costs for fresh fruits, particularly berries, oranges, and melons, with producing regions experiencing robust and stable harvests.
The agency also mentioned that last year’s GST holiday, which lasted from December 14, 2024, to February 15, 2025, continues to affect inflation data.
In January 2026, restaurant prices were higher compared to the previous year, as the GST break was applicable to those items during that period.
This also applied to alcoholic beverages purchased from liquor stores and other licensed venues, as well as toys, games, hobby supplies, and children’s apparel.
Shelter, cell service rates slow growth
Statistics Canada indicates that housing price growth has been on a downward trend year-over-year since early 2024.
This trend persisted in January 2026, with price growth recorded at 1.7 percent, marking the first instance in five years that the rate has dipped below two percent.
Rent prices decelerated the most in Prince Edward Island and Saskatchewan. The index reflecting changes in mortgage interest rates also showed a slowdown in January.
Cell service prices rose at a slower pace in January, registering a yearly rate of 4.9 percent compared to December’s 14.6 percent.
Tag: rewrite-pending