Canada’s inflation rate cooled slightly in January, offering further signs that overall price pressures are beginning to ease, even as everyday essentials such as food and rent continue to weigh heavily on household budgets.
Statistics Canada reported Tuesday that the annual inflation rate slipped to 2.3 per cent in January, down from 2.4 per cent in December. Most economists had expected inflation to remain unchanged, making the modest decline a welcome surprise.
The easing was driven largely by lower gasoline prices. Pump prices dropped 16.7 per cent year over year in January, a steeper decline than the 13.8 per cent decrease recorded in December. Statistics Canada noted that the sharper annual drop reflects softer energy prices as well as base-year effects. On a monthly basis, gasoline prices rose only 0.5 per cent, far below the surge seen in January of last year.
However, inflation remains firmer when gasoline is removed from the equation. Excluding fuel, the Consumer Price Index rose 3.0 per cent compared with a year earlier, unchanged from December. Core inflation, which strips out both food and energy, edged down slightly to 2.4 per cent from 2.5 per cent.
Food prices continue to be a major source of financial strain for Canadians. Grocery prices climbed 4.8 per cent year over year, although the pace of increase softened slightly from December. Fresh fruit prices declined 3.1 per cent, supported by stable harvests in key growing regions.
At the same time, dining out has become significantly more expensive. Restaurant meal prices surged 12.3 per cent compared with January last year, largely reflecting comparisons to early 2025 when a temporary GST and HST tax break had reduced menu prices.
Other consumer goods impacted by that tax holiday — including alcoholic beverages, toys, and children’s clothing — also recorded notable annual price increases.
Shelter costs, one of the biggest drivers of inflation over the past two years, showed additional signs of cooling. Overall shelter prices rose 1.7 per cent year over year, marking the first time in nearly five years that shelter inflation has dipped below the 2 per cent threshold.
Rent increased 4.3 per cent, slowing from December, while mortgage interest costs rose 1.2 per cent and continued the steady decline that began in late 2023.
On a month-to-month basis, the Consumer Price Index was unchanged in January. After seasonal adjustment, prices rose a modest 0.1 per cent.
With inflation now hovering close to the Bank of Canada’s 2 per cent target, attention is turning to whether easing shelter costs and lower fuel prices will help keep broader inflation pressures under control in the months ahead.