Canada Inflation Research Brief

Uptick in headline rate largely reflected temporary tax distortions. The consumer price index rose 2.4 per cent year-over-year, up from 2.2 per cent in November. It was driven primarily by adverse base effects tied to the expiry of the GST/HST holiday in December 2024. That distortion pushed food and restaurant prices sharply higher year-over-year, while energy prices continued to provide a meaningful offset amid falling gasoline prices. Beneath the surface, inflation momentum continued to cool. The Bank of Canada’s preferred core measures — CPI-trim and CPI-median — rose at an average pace of just 0.1 per cent month-over-month, marking a second consecutive below-target reading. The three-month annualized pace slowed to 1.7 per cent, reinforcing evidence that broad-based inflation pressures are easing even as headline CPI remains temporarily elevated.