Canada’s inflation rate for January decreased to 2.3 per cent, as reported by Statistics Canada. This decline was primarily influenced by lower gasoline prices. Economists had anticipated that the rate would hold steady at 2.4 per cent from December. Gas prices notably dropped by 16.7 per cent in January compared to the previous year, contributing to the overall decrease. Excluding gas prices, the inflation rate for January stood at three per cent.
The Bank of Canada’s core inflation measures, which exclude volatile factors like one-time tax adjustments and gas costs, also saw a decrease in January. These adjustments brought the core inflation rates closer to the central bank’s target of two per cent. Douglas Porter, the chief economist at Bank of Montreal, stated that this development is positive for the Bank of Canada as inflation is approaching the target level more broadly.
Porter highlighted that the central bank has set a high bar for further interest rate cuts and emphasized that monetary policy cannot address supply-related shocks. However, if inflation continues to slow down, the bank may be in a position to provide support to the economy in case of significant growth challenges.
In the food sector, grocery inflation dipped to 4.8 per cent in January from the previous year, following a rise to five per cent in December. The decrease in price growth was mainly driven by lower prices for fresh fruits, particularly berries, oranges, and melons, due to stable harvests in producing regions. Additionally, the impact of last year’s GST break, which was in effect from December 14, 2024, to February 15, 2025, continues to influence inflation data.
Restaurant prices in January 2026 were higher compared to the previous year due to the effects of the GST break on those items during that period. Similarly, prices for alcohol purchased from liquor stores and other licensed establishments, as well as toys, games, hobby supplies, and children’s clothing, were affected by the GST break.
Regarding shelter costs and cell service rates, there was a slowdown in growth. Housing prices experienced a decrease in growth to 1.7 per cent in January, marking the first time in five years that the rate fell below two per cent. Rent prices decelerated notably in Prince Edward Island and Saskatchewan. Furthermore, cell service prices saw a decrease in yearly growth to 4.9 per cent in January, down from December’s 14.6 per cent rate.