Cheaper Gasoline Helped Keep CPI Growth Cool in January

In January, the Consumer Price Index (CPI) rose by 2.3 per cent year-over-year (y/y). This was lower than December’s 2.4 per cent increase.

Key insights

Canada’s CPI decelerated to 2.3 per cent (year-over-year) in January, down from a 2.4 per cent increase in December. Lower gasoline prices (compared to the same month in 2025) drove the overall growth of the CPI down. Excluding gasoline, however, the CPI grew by 3.0 per cent. Upward pressures stemmed in part from large price changes for goods and services included in the GST/HST holiday last year. Prices for restaurant food in January 2025, for example, were sharply lower with taxes removed and, with these taxes restored this year, restaurant food price growth appears atypically strong (+12.3 per cent). This base effect will continue to add upward pressure to February’s CPI.

Other signs pointed to more promising price developments. The Bank of Canada’s preferred measures of core inflation fell to an average of 2.5 per cent, signalling a deceleration in underlying price pressure. Another measure of core prices—CPI excluding food and energy—also slowed. Rent growth—a major contributor to price pressures recently—also decelerated to 4.3 per cent from 4.9 per cent in the previous month. As population growth has slowed sharply, rent prices should continue to cool.

Grocery price growth, which had been heating up for several months, also cooled slightly in January. As prices for food sold in stores have grown faster than the all-items CPI by a wide margin in 2022, 2023, and 2025, the accelerating pace of grocery price growth has again captured Canadians’ attention. These most recent increases are likely related to a weaker Canadian dollar and costlier imported food earlier last year. These past cost increases to grocery retailers are being passed to consumers now. Given the salience of food prices, their rise can have a disproportionate impact on Canadians’ near-term inflation expectations. The deceleration in January will come as a welcome relief.

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