Canada Inflation Research Brief

Base effects mask further cooling. Inflation rose 2.3 per cent year over-year in January, down 10 basis points from December, and below expectations for an unchanged reading. On a monthly basis, prices were largely flat, underscoring the lack of meaningful momentum. As in prior months, distortions tied to last year’s temporary GST/HST holiday continued to affect the annual comparison. Previously tax-exempt items like restaurant prices surged 12.3 per cent year-over-year, while alcoholic beverages and children’s goods also posted outsized gains, reflecting base effects rather than fresh demand-driven pressures. These increases were more than offset by a 16.7 per cent annual decline in gasoline prices and moderating shelter costs. Excluding the impact of indirect taxes, year-over-year price growth slowed to 2.1 per cent, reinforcing that underlying inflation continues to cool.