Canada’s inflation rate slowed slightly in January, offering fresh signs that price pressures are easing, though key household costs remain elevated.
Statistics Canada reported Tuesday that the annual inflation rate edged down to 2.3 percent in January, compared with 2.4 percent in December. Economists had widely expected the rate to hold steady. The decline was driven largely by lower gasoline prices.
Pump prices fell 16.7 percent year over year in January, a sharper drop than the 13.8 percent decrease recorded in December. The larger annual decline reflects both softer energy prices and base year effects. On a monthly basis, gasoline prices rose modestly by 0.5 percent, far below the jump seen in January last year.
Strip out gasoline, and inflation looks firmer. Excluding gas, the Consumer Price Index rose 3.0 percent compared with a year earlier, unchanged from December. Core inflation, which excludes food and energy, slowed slightly to 2.4 percent from 2.5 percent.
Food prices continue to strain household budgets. Grocery prices rose 4.8 percent year over year, though growth eased slightly from December. Fresh fruit prices fell 3.1 percent, helped by stable harvests in key producing regions. In contrast, restaurant meals climbed 12.3 percent compared with January last year. That jump reflects a base year comparison to early 2025, when a temporary GST and HST break lowered menu prices.
Other goods previously affected by the tax holiday, including alcoholic beverages, toys and children’s clothing, also posted notable annual increases.
Shelter costs showed further signs of cooling. Overall shelter prices rose 1.7 percent year over year, the first time in nearly five years that growth has dipped below 2 percent. Rent increased 4.3 percent, a slower pace than December, while mortgage interest costs rose 1.2 percent and continued a steady deceleration that began in late 2023.
Month over month, the CPI was unchanged in January. On a seasonally adjusted basis, prices rose 0.1 percent.
With inflation hovering near the Bank of Canada’s 2 percent target, attention now turns to whether slower shelter growth and lower fuel costs will keep broader price pressures contained in the months ahead.
