Canada experienced a slight uptick in its annual inflation rate, reaching 2.4% in December compared to the previous year. This increase followed the conclusion of a temporary GST break initiated by the federal government in December 2024, which had a dampening effect on prices. In November, inflation was at 2.2%, with gas prices contributing to the rise. Excluding energy costs, inflation reached 3% in December, up from 2.6% in November.
The Bank of Canada closely monitors core inflation measures, which exclude volatile components such as gas prices and tax adjustments. Two of these measures declined in December, aligning closely with the Bank’s target rate of around 2.5%.
Prices for travel tours dropped by 3.2% year-over-year in December, while air transportation prices decreased by 0.8%. Despite the usual trend of rising transportation costs during the holidays, December saw a significant 34.5% spike compared to November. Grocery prices remained stable between November and December but surged by 5% year-over-year, driven by increases in coffee and fresh or frozen beef prices.
Statistics Canada also released its annual review of consumer prices for 2025, showing a 2.1% overall inflation rate on an annual average basis. This marks a slight decrease from the 2.4% increase in 2024. Services prices rose by 3.1% in 2025, with slower growth in mortgage interest costs contributing to this trend. Price growth for shelter, including rent, decelerated. On the other hand, goods prices increased at a higher rate in 2025, with passenger vehicles and grocery items seeing notable upticks.
Factors such as weather changes affecting coffee and cocoa bean production and U.S. tariffs impacting coffee and sweet prices played a role in driving up grocery costs. Meat prices, particularly fresh and frozen beef, surged by 13.5% due to low North American cattle inventories. Additionally, restaurant dining prices increased by 2.6% in 2025, slightly lower than the previous year’s rate of 3.6%.