Data released by Statistics Canada on Tuesday showed the consumer price index (CPI) rose 2.3 per cent year-on-year in January, down from 2.4 per cent in December and below market forecasts of 2.4 per cent
Canada’s annual inflation rate eased marginally in January, as a steep decline in gasoline prices offset persistent strength in food and clothing costs, reinforcing expectations that price pressures are stabilising near the central bank’s comfort zone.
Data released by Statistics Canada on Tuesday showed the consumer price index (CPI) rose 2.3 per cent year-on-year in January, down from 2.4 per cent in December and below market forecasts of 2.4 per cent. On a month-on-month basis, prices were unchanged, signalling a loss of momentum at the start of 2026.
Fuel-driven relief pulls headline lower
The moderation in headline inflation was largely fuel-driven. Gasoline prices fell 16.7 per cent in January compared with a year earlier, deepening from a 13.8 per cent decline in December. Statistics Canada said the gasoline index was the single largest contributor to the slowdown in overall inflation.
However, stripping out gasoline presents a less benign picture. Excluding fuel, consumer prices rose 3 per cent annually in January, unchanged from December, suggesting underlying pressures remain firmer than the headline number implies.
Food and alcohol prices remain elevated
Food inflation stayed sticky, climbing 7.3 per cent year-on-year, led primarily by higher restaurant prices. The category containing mostly alcoholic beverages rose 4.8 per cent.
Clothing prices also strengthened, influenced partly by base effects linked to a temporary sales tax break in the same period last year. As that relief unwound, year-on-year comparisons turned less favourable, mechanically lifting price growth in several discretionary categories.
Core measures point to gradual easing
Excluding food and energy, CPI rose 2.4 per cent in January, easing from 2.5 per cent in December. The preferred core gauges tracked by the Bank of Canada also showed further moderation.
CPI-median—which captures the price change of the middle component in the CPI basket—slowed to 2.5 per cent from 2.6 per cent previously. CPI-trim, which excludes the most extreme price swings, fell more sharply to 2.4 per cent from 2.7 per cent in December.
Shelter costs, the largest-weighted component in the inflation basket, continued to decelerate, rising 1.7 per cent from a year earlier—an encouraging signal that housing-related pressures are gradually easing.
Policy pause likely to persist
The January data reinforce the Bank of Canada’s recent assessment that inflation is broadly stable around the midpoint of its 1–3 per cent target range. The central bank has paused its rate-cut cycle, keeping its benchmark policy rate at 2.25 per cent as it gauges whether easing price pressures can be sustained without derailing growth.
Financial markets reacted mildly to the data. The Canadian dollar weakened 0.2 per cent to C$1.3668 against the US dollar, while yields on two-year government bonds fell 3.9 basis points to 2.439 per cent, reflecting expectations that policymakers are likely to remain on hold in the near term.
End of Article
Leave a Reply