Canada's Annual Inflation Rate Rises to 2.4% in December, Exceeding Economist Expectations

December Inflation Figures Released

Statistics Canada announced yesterday, January 19, 2026, that Canada's annual inflation rate rose to 2.4% in December 2025. This marks an increase from the 2.2% recorded in November 2025. The reported figure exceeded the expectations of many economists, who had largely predicted the rate to hold steady at 2.2%.

Factors Influencing the Increase

The acceleration in the Consumer Price Index (CPI) was primarily driven by base effects stemming from a temporary Goods and Services Tax (GST) and Harmonized Sales Tax (HST) break implemented in mid-December 2024 and concluding in February 2025. This tax holiday led to lower prices a year ago, consequently pushing up the year-over-year comparison for December 2025.

Key contributors to the upward movement in prices included:

• Restaurant prices, which saw an 8.5% increase in December, significantly higher than the 3.3% rise in November.
• Alcoholic beverages purchased from stores, with prices climbing by 5.6%.
• Toys, games, and hobby supplies, which experienced a 7.5% increase.
• Food purchased from stores, rising by 5.0% year-over-year.

Conversely, a notable moderating factor was a year-over-year decline in gasoline prices, which fell by 13.8% in December.

Core Inflation and Bank of Canada's Stance

Despite the uptick in the headline inflation rate, the Bank of Canada's preferred core measures of inflation, specifically CPI-trim and CPI-median, showed a deceleration for the third consecutive month. CPI-trim decreased to 2.7% from 2.9%, while CPI-median fell to 2.5% from 2.8% in November.

The Bank of Canada maintains an inflation-control target of keeping the total CPI inflation at the 2% midpoint within a range of 1% to 3%. The central bank held its policy interest rate steady at 2.25% in December. Economists suggest that the latest inflation data is unlikely to prompt a change in the Bank of Canada's interest rate policy in the immediate future.