Canada’s annual inflation rate decreased to 2.3 percent in January, as reported by Statistics Canada. This decline was influenced by a drop in gasoline prices. Economists had anticipated the rate to stay steady at 2.4 percent from the previous month. Gas prices were a significant factor in the overall rate decrease, falling by 16.7 percent in January compared to the same period last year. Excluding gas, January’s inflation rate stood at three percent.
The Bank of Canada’s core inflation indicators, which adjust for fluctuations in one-time tax adjustments and gas costs, all showed a decrease in January. This brought these rates closer to the central bank’s targeted two percent inflation rate. Chief economist at Bank of Montreal, Douglas Porter, commented that this was a positive outcome for the Bank of Canada, as inflation is approaching the desired target more broadly. However, Porter warned that the central bank is cautious about lowering interest rates again and emphasized that monetary policy cannot resolve supply-related disruptions. Yet, if inflation continues to slow down, the bank may be prepared to support the economy if growth faces challenges during a structural shift.
In terms of food inflation, the growth rate slightly slowed to 4.8 percent in January from the previous year, after reaching five percent in December. This deceleration was primarily driven by reduced prices for fresh fruit, particularly berries, oranges, and melons, due to robust and stable harvests in producing regions. The impact of last year’s GST reduction, which was active from December 14, 2024, to February 15, 2025, still lingers in the inflation data, affecting items like restaurant meals, alcohol from liquor stores, toys, games, hobby supplies, and children’s clothing.
Housing price growth has been on a downward trend since early 2024, according to Statistics Canada. This trend persisted in January 2026, with price growth slowing to 1.7 percent, the first time in five years that the rate dropped below two percent. Rent prices decelerated notably in Prince Edward Island and Saskatchewan. Furthermore, the index tracking changes in homeowners’ mortgage interest payments also slowed in January. Cell service price growth eased to 4.9 percent on a yearly basis in January, down from December’s 14.6 percent rate.
