- Prior was 2.2%
- Inflation m/m -0.2% vs +0.1% prior
- BOC core 2.8% vs 2.9% prior
- BOC core m/m -0.4% vs -0.1% prior
- Core CPI % m/m +0.2% vs +0.2% prior
- CPI median +2.5% vs +2.8% expected
- CPI trim +2.7% vs +2.8% expected
- CPI common +2.8% vs 2.8% prior
- Ex gasoline +3.0% vs +2.6% prior
The market has been pricing in a chance of a rate hike this year and those odds just ticked a bit higher after this inflation report. Notably, there is something of a technical change with this report as the HST (Canada’s VAT) tax began in Dec 14, 2024 and that fell out of the calculation.
Year over year, higher restaurant prices were the largest contributor to faster growth in the all-items CPI, which echos signs of a strong consumer. Grocery store prices also rose 5.0% y/y.
USD/CAD dipped about 8 pips on the release.
Back in November, headline inflation held steady with a modest 0.1% monthly rise, while core inflation metrics signaled cooling. Both CPI median and trim decelerated to 2.8%, coming in slightly below expectations. This downward pressure was primarily driven by lower prices for travel and accommodation, alongside slower growth in rent costs, providing generally positive data for the Bank of Canada.
However, these service-sector declines were offset by rising goods prices, most notably at the grocery store. Food inflation accelerated to 4.7% year-over-year—the steepest rise since late 2023—fueled by sharp spikes in staples like frozen beef (+17.7%) and coffee (+27.8%).
Canadian inflation has followed a dramatic volatility curve since 2021. After surging due to post-pandemic supply shocks, headline CPI peaked at a generational high of 8.1% in June 2022. Aggressive interest rate hikes successfully forced a broad deceleration throughout 2023 and 2024, bringing overall inflation back near the 2% target by 2025.
However, the “last mile” has proven difficult; while headline numbers have stabilized, essential costs like groceries and shelter remain stubbornly elevated entering 2026.
This article was written by Adam Button at investinglive.com.