The Consumer Price Index (CPI) rose 1.8% on a year-over-year basis in February, following a 2.3% increase in January, according to a report released Monday by Statistics Canada.
The slowdown in the all-items CPI on a year-over-year basis was largely driven by a monthly increase in prices in February 2025, when the GST/HST break ended partway through the month, and as a result, consumers paid more for affected products. This month-over-month increase fell out of the 12-month price movement in February 2026, resulting in a decelerating base-year effect on headline inflation, said the federal agency.
“The most notable index impacted by the base-year effect in February 2026 was food purchased from restaurants, in addition to smaller impacts from alcoholic beverages and toys. On a year-over-year basis, there was downward pressure in February from a range of indexes including gasoline (-14.2%), natural gas (-17.1%), homeowners’ replacement cost (-2.1%), other owned accommodation expenses (-2.6%) and travel tours (-3.1%),” it said.
“Excluding the effect of indirect taxes, the CPI rose 1.9% year over year in February, decelerating each month since December 2025 (+2.5%). The CPI was up 0.5% month over month in February 2026. On a seasonally adjusted monthly basis, the CPI increased 0.1%.”
Most notably, this affected prices for food purchased from restaurants. Even with this deceleration, prices rose 7.8% year over year in February 2026, added Statistics Canada.
Similarly, this put downward pressure on year-over-year price growth for alcoholic beverages purchased from stores (+5.6%), toys, games (excluding video games) and hobby supplies (+5.4%) and alcoholic beverages served in licensed establishments (+6.8%).
“On a year-over-year basis, prices for food purchased from stores rose 4.1% in February following a 4.8% increase in January. While downward pressure was broad-based, the deceleration was modest, and led by prices for fresh or frozen beef, which rose 13.9% in February following an 18.8% increase in January,” explained the federal agency. “Although growth in grocery prices slowed in February, they have risen 30.1% since February 2021.
“Gasoline prices moderated the slowdown in the CPI, declining 14.2% in February after a 16.7% decline in January. The smaller year-over-year decline was due to a 3.6% monthly increase largely resulting from higher crude oil prices in the lead-up to the conflict in the Middle East, as well as oil supply disruptions in some producer countries.
“On a month-over-month basis, consumers paid 9.6% more for gasoline in British Columbia in February, the largest increase among the provinces, primarily due to lower supply amid refinery maintenance and closures in the Pacific Northwest.”
Katherine Judge, Senior Economist, CIBC Capital Markets, said “the tame report will be welcomed by policymakers ahead of the energy price shock, as it shows that labour market slack is keeping a lid on core prices, with the issue for the BoC being how long the oil price shock lasts for and its magnitude.”
Leslie Preston, Managing Director & Senior Economist, TD, said: “Canada’s inflation cooled in February, but that is backward looking now that prices at the pump have skyrocketed in the wake of the U.S./Israeli war with Iran. We expect higher energy costs will lift headline inflation close to 3% in the months ahead, but the effect on the Bank of Canada’s core measures should be more modest. Core inflation is expected to stay reasonably close to the 2% target on a year-on-year basis this year.
“The Bank of Canada’s interest rate decision is coming up on Wednesday, and the Bank is universally expected to remain on pause. We will be listening closely for the Bank’s assessment of the impact of the oil shock on Canada’s economy.”
Douglas Porter, Chief Economist, BMO Capital Markets, added: “Inflation was a tad tamer than even our below-consensus forecast in February. And while this release has a stale feel, since gasoline prices have since surged more than 15% just since the end of last month, it clearly shows that underlying inflation was decelerating notably in early 2026. With most measures of core inflation close to the Bank’s 2% target, policymakers can more readily “look through” the oil-driven spike that is surely coming to headline inflation in the next few months. And that is particularly the case with employment weakening even before the war, and the uncertain fate of the USMCA still looming.”
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