Canada’s annual inflation rate edged down to 2.3% in January with decline in gas prices

Canada’s annual inflation rate edged down to 2.3 per cent in January, Statistics Canada said on Tuesday, driven downward by a decline in the cost of gasoline.

Economists were largely expecting the rate to remain unchanged from December’s 2.4 per cent.

Pump prices put pressure on the headline rate, having fallen 16.7 per cent in January compared to the same period last year. With gas excluded, January’s inflation rate came in at three per cent.

The Bank of Canada’s preferred measures of core inflation, which strip away volatility from one-time tax changes and gas prices, all ticked down in January — bringing those rates closer to the central bank’s two per cent inflation target.

“Overall, this is an encouraging result for the Bank of Canada, with inflation finally nearing the [two per cent] target on a broader basis,” wrote Douglas Porter, chief economist at Bank of Montreal, in a note to clients.

However, he noted that the central bank has made it clear that the bar to cut the key interest rate again is high — and that monetary policy can’t fix supply-related shocks.

“Even so, if inflation continues to decelerate, the bank could be in position to support the economy should growth truly struggle as it undergoes a structural shift,” said Porter.

Food inflation growth slows slightly

Grocery inflation edged down to 4.8 per cent in January from a year earlier after rising to five per cent in December, according to Statistics Canada.

The slowdown in price growth was mostly driven by lower prices for fresh fruit — especially berries, oranges and melons, with producing regions seeing strong, stable harvests.

The data agency noted that last year’s GST break, which ran from Dec. 14, 2024 to Feb. 15, 2025, is still impacting inflation data.

Restaurant prices were higher in January 2026 compared to a year earlier, for example, because the GST break was in effect on those items at that time.

The same is true for alcohol bought from liquor stores and other licensed establishments, as well as toys, games, hobby supplies and children’s clothing.

Shelter, cell service rates slow growth

Housing price growth has been slowing year-over-year since early 2024, according to Statistics Canada.

That trend continued in January 2026, with price growth hitting 1.7 per cent, marking the first time in five years that the rate has fallen below two per cent.

Rent prices slowed the most in Prince Edward Island and Saskatchewan. The index that measures changes in how much interest homeowners owe on their mortgage also slowed in January.

Cell service prices slowed in January to 4.9 per cent on a yearly basis compared to December’s 14.6 per cent rate.