Canada’s annual inflation rate eased slightly to 2.3 percent in January, down from 2.4 percent in December, according to new data released by Statistics Canada on Feb. 17. The modest decline was largely driven by a sharp drop in gasoline prices, which fell 16.7 percent compared to a year earlier.
Despite the overall slowdown, underlying price pressures remain evident. When gasoline is excluded, the Consumer Price Index (CPI) rose three percent year-over-year in January, unchanged from December’s pace.
Statistics Canada noted that several consumer categories recorded notable increases. Restaurant food prices climbed 12.3 percent compared to January of last year. The agency said this spike partly reflects the comparison to early 2025, when a temporary GST break between Dec. 14, 2024, and Feb. 15, 2025, had lowered prices. Alcoholic beverages purchased from stores rose 7.9 percent annually, while toys and games increased 8.7 percent. Children’s clothing prices were up 6.3 percent.
Grocery prices continued to rise, though at a slightly slower pace. Food purchased from stores increased 4.8 percent year-over-year in January, down from five percent in December. The moderation was largely attributed to a 3.1 percent decline in fresh fruit prices, reversing a 4.5 percent increase seen the previous month. Stable harvests in key producing regions contributed to lower prices for berries, oranges, and melons.
Shelter costs showed signs of easing as well. Annual growth in shelter prices slowed to 1.7 percent in January the first time in nearly five years that the year-over-year increase fell below two percent. The deceleration was linked to lower mortgage interest rates and slower rent growth. Nationally, rent rose 4.3 percent year-over-year in January, down from 4.9 percent in December. Regionally, rents increased 1.8 percent in Saskatchewan while declining 0.2 percent in Prince Edward Island.
Other services also saw slower price increases. Cellular service costs rose 4.9 percent compared to a 14.6 percent annual increase in December.
Economists described the latest inflation figures as encouraging. Bank of Montreal Chief Economist Douglas Porter called the results positive for the Bank of Canada, noting that inflation is moving closer to the central bank’s two percent target on a broader basis. While he acknowledged that core inflation still requires attention, he said short-term measures are clearly moderating. Porter added that although the Bank has signalled a high threshold for further interest rate cuts, continued easing in inflation could create room for additional reductions.
Meanwhile, the inflation report sparked political debate. Conservative Leader Pierre Poilievre argued that food inflation has reached 7.3 percent in Canada which he claimed is the highest among G7 countries and blamed rising costs on increased federal taxes on fuel, farming, and food processing. He pledged to press Prime Minister Mark Carney to reverse such policies.
Carney has previously defended the government’s record, stating that wage growth has outpaced inflation. He has also highlighted efforts to make the National School Food program permanent, with plans to expand access to meals for up to 400,000 additional children each year.
As inflation continues to moderate, attention now turns to the Bank of Canada’s next policy decision and whether further relief may be on the horizon for Canadian households.
