Canada’s headline inflation rate eased to 2.3% in January, down from 2.4% in December, as a sharp drop in gasoline prices provided the biggest source of relief for consumers, Statistics Canada’s consumer price index showed Tuesday.
Most analysts and economists had expected inflation to hold steady, but lower energy costs helped push the annual pace slightly below forecasts. Gasoline prices fell 16.7% year-over-year in January, a steeper decline than December’s 13.8% drop. The larger fall reflected base-year effects, as pump prices had surged in early 2025 alongside rising crude oil prices.
While gasoline prices edged higher on a month-to-month basis, the year-over-year decline was enough to drive most of the slowdown in headline inflation. Excluding gasoline, the CPI rose 3%, unchanged from December.
Food prices continued to rise in January, but at a slightly slower pace. Grocery prices increased 4.8% year-over-year, down from 5% in December. The easing was largely due to falling fresh fruit prices, which declined 3.1% compared with a year earlier after rising strongly the previous month. Statistics Canada cited generally strong or stable harvests in key producing regions, with berries, oranges and melons contributing most to the downward pressure. In contrast, restaurant food prices jumped 12.3%, reflecting comparisons with January 2025, when a temporary GST/HST break had lowered prices.
Shelter costs also showed meaningful improvement. Annual shelter inflation slowed to 1.7% in January, the first time in nearly five years it has fallen below 2%. Rent growth decelerated to 4.3%, while mortgage interest costs rose 1.2%, continuing a steady slowdown that began in late 2023.
Measures of core inflation closely watched by the Bank of Canada also edged lower in January, moving closer to the central bank’s 2% target.
With inflation mostly stable, some economists said today they expect the Bank of Canada’s next move could be a reduction in the key overnight lending rate.
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