Inflation in Canada Accelerates to 2.4% In December, But Key Measures Ease
- Consumer prices in Canada rose a faster-than-expected 2.4% in December 2025, largely due to the base effect of the previous year's sales tax break, but closely watched core measures of inflation cooled for the third consecutive month, data showed on Monday, January 19, 2026. Analysts polled by Reuters had forecast inflation would hold at November's 2.2% rate.
- The Canadian central bank's preferred measures of core inflation, CPI-median and CPI-trim, continued to ease and were the lowest since December 2024. CPI-median - or the value at the middle of the set of price changes in a month - cooled to 2.5% from 2.8% in November, while CPI-trim - which excludes the most extreme price changes - decreased to 2.7% from 2.9%.
- The Bank held its key policy rate steady at 2.25% in December 2025 and said this was about the right level to keep inflation close to its 2.0% target. Despite a somewhat stronger than expected headline reading, the data is still consistent with underlying inflation being close to 2%. The deceleration in core prices should allow the Bank of Canada to keep rates on hold. Money markets expect rates to stay unchanged this year.
- The rise in headline inflation in December 2025 was driven by a temporary sales tax break on certain food and children's items authorised by the previous Liberal government headed by Justin Trudeau in the comparative December 2024 period. Restaurant prices, one of the segments affected by the tax holiday, were the largest contributor to the acceleration in the annual inflation rate in December 2025.
- On a monthly basis, the consumer price index declined by 0.2%, Statistics Canada data showed. The monthly decline was less than market expectations of a 0.3% decrease.
(Source: Reuters)