The Consumer Price Index (CPI) rose 2.3% on a year-over-year basis in January, following a 2.4% increase in December, according to a report released Tuesday by Statistics Canada.
The gasoline price index was the largest contributor to deceleration in headline inflation, with a larger decline in January compared with December. Excluding gasoline, the CPI rose 3.0% in January, matching the increase in December, said the federal agency.
“Indexes with year-over-year movements impacted by the temporary GST/HST break in January 2025 continued to put upward pressure on the year-over-year all-items increase in January 2026. Of the affected indexes, the CPI continued to be most impacted by acceleration in prices for restaurant meals, and to a lesser degree, prices for alcoholic beverages, toys and children’s clothing,” it said.
“Excluding food and energy, the CPI rose 2.4% year over year in January, following a 2.5% increase in December.”
Statistics Canada said the prices included in the CPI are final prices, inclusive of all excise and other taxes paid by consumers. In particular, prices include the Goods and Services Tax, provincial retail sales taxes or the Harmonized Sales Tax, as well as any environmental, liquor and tobacco taxes if applicable. This means that the CPI can change as a result of changes in any of these taxes.
The tax exemption began on December 14, 2024, and ended on February 15, 2025, affecting approximately 10% of the CPI basket, it said.
“Prices at the pump fell 16.7% year over year in January, after a 13.8% decline in December. The larger year-over-year decline was mainly due to a base-year effect. The index rose 0.5% month over month in January 2026, compared with a 4.0% increase in January 2025, when crude oil prices rose. Additionally, the partial reintroduction of the provincial gas tax in Manitoba in January 2025 is no longer impacting the 12-month movement,” explained Statistics Canada.
For food purchased from restaurants, prices were higher in January 2026 (+12.3%) compared with January 2025, when prices were lower as a result of the tax break.
Similarly, prices rose on a year-over-year basis for other previously tax-exempted goods in January 2026, including alcoholic beverages purchased from stores (+7.9%), alcoholic beverages served in licensed establishments (+9.0%), toys, games (excluding video games) and hobby supplies (+8.7%) and children’s clothing (+6.3%), it said.
“Prices for food purchased from stores rose 4.8% year over year in January following a 5.0% increase in December. The slower price growth was mainly driven by a decline in fresh fruit prices (-3.1%) in January, after a 4.5% increase in December. Amid generally strong or stable harvests in producer regions, the largest contributors to downward pressure on prices were berries, oranges and melons,” said Statistics Canada.
Leslie Preston, Managing Director & Senior Economist, TD Economics, said: “Even with the base year effect from last year’s GST holiday, inflation was looking softer than expected in January. Underlying inflation remains above the 2% target on a year-on-year basis, but trends in recent months are looking decidedly soft. Canadian government bond yields are off slightly on the soft report.
“Overall, January’s data is consistent with our expectation for inflation to moderate to the Bank’s target over the next year (see recent forecast), as past inflation problem areas, like rents, continue to cool.”
Douglas Porter, Chief Economist, BMO Capital Markets, said: “Overall, this is an encouraging result for the Bank of Canada, with inflation finally nearing the 2% target on a broader basis. There’s still some wood to chop on core inflation, but the shorter term metrics are moderating noticeably. Still, the Bank has made it abundantly clear that the bar to cut rates again is quite high, and it continues to stress that monetary policy cannot fix supply 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.”
