Canada’s annual inflation rate decreased to 2.3 percent in January, driven by a drop in gasoline prices, according to Statistics Canada. Economists had anticipated the rate to remain steady at 2.4 percent from the previous month. Gas prices fell by 16.7 percent in January compared to the same period last year, impacting the headline inflation rate. Excluding gas prices, January’s inflation rate stood at three percent.
The Bank of Canada’s core inflation measures, which eliminate volatility from one-time tax adjustments and gas costs, all decreased in January, moving closer to the central bank’s two percent inflation target. Chief economist Douglas Porter of Bank of Montreal expressed optimism about inflation nearing the target, but highlighted the central bank’s cautious stance on reducing interest rates and its limitation in addressing supply-related shocks.
Food inflation slightly slowed in January, with grocery prices rising by 4.8 percent compared to the previous year, down from five percent in December. The decline was attributed to lower prices for fresh fruit, particularly berries, oranges, and melons, due to strong and stable harvests in producing regions. The impact of last year’s GST break, from December 14, 2024, to February 15, 2025, still influenced inflation data.
Housing price growth has been decreasing since early 2024, with January 2026 seeing a 1.7 percent increase – the first time in five years that the rate dropped below two percent. Rent prices slowed notably in Prince Edward Island and Saskatchewan, while the mortgage interest index also saw a slowdown in January. Cell service prices increased by 4.9 percent year-over-year in January, a significant decrease from December’s 14.6 percent rate.