Canada’s inflation rate for January decreased to 2.3 percent, primarily due to a drop in gasoline prices, according to Statistics Canada. Economists had forecasted the rate to stay steady at 2.4 percent from December. Gas prices notably fell by 16.7 percent in January compared to the previous year, influencing the overall inflation rate. Excluding gas prices, the inflation rate for January was recorded at three percent.
The Bank of Canada’s core inflation measures, which exclude volatile factors like one-time tax changes and gas prices, also decreased in January, moving closer to the central bank’s target of two percent. Chief economist Douglas Porter from Bank of Montreal commented that this development was positive for the Bank of Canada as inflation approached the desired target more broadly.
Porter highlighted that the central bank has emphasized the challenge of reducing interest rates further and that monetary policy cannot address supply-related disturbances. However, if inflation continues to slow down, there may be room for the central bank to provide economic support if growth faces significant challenges during a structural transition.
In the realm of food inflation, the growth rate slightly eased to 4.8 percent in January from the previous year, with a notable decline in fresh fruit prices, particularly berries, oranges, and melons due to stable harvests in producing regions. The lingering impact of the GST break from the previous year is still affecting inflation data.
Moreover, housing price growth in Canada has been gradually declining since early 2024, with the rate reaching 1.7 percent in January 2026, marking the first time in five years that it fell below two percent. Rent prices slowed notably in Prince Edward Island and Saskatchewan. Additionally, cell service prices saw a significant decrease in growth in January compared to the previous month, dropping to 4.9 percent year-over-year.