Canada’s annual inflation rate decreased to 2.3 percent in January, with gasoline prices being the main contributor to this decline, according to Statistics Canada. Economists had anticipated the rate to stay steady at 2.4 percent from the previous month. Gas prices dropped by 16.7 percent in January compared to the same period last year, impacting the headline rate. Excluding gas prices, inflation in January stood at three percent.
The Bank of Canada’s core inflation measures, which exclude volatile factors like one-time tax changes and gas prices, all decreased in January, aligning more closely with the central bank’s target of two percent inflation. Chief economist Douglas Porter from Bank of Montreal remarked that this development was positive for the Bank of Canada, as inflation is approaching the desired target more broadly. However, Porter highlighted that the central bank has emphasized the need for significant reasons to lower the key interest rate and that monetary policy cannot address supply-related shocks.
Food inflation eased slightly in January, with grocery prices rising by 4.8 percent compared to the previous year, down from five percent in December. The drop in price growth was driven by lower costs for fresh fruits, particularly berries, oranges, and melons, due to strong and stable harvests in producing regions. Statistics Canada mentioned that the impact of last year’s GST break, which lasted from December 14, 2024, to February 15, 2025, is still affecting inflation data.
Housing price growth has been on a downtrend since early 2024, as indicated by Statistics Canada. In January 2026, the growth rate slowed to 1.7 percent, the first time in five years that it fell below two percent. Rent prices decelerated notably in Prince Edward Island and Saskatchewan. Additionally, cell service prices saw a decrease in growth in January to 4.9 percent annually, compared to December’s rate of 14.6 percent.