Canada's annual inflation rate ticked back up in January to 1.9 per cent, Statistics Canada reported on Tuesday.
Prices got a full month-long effect of the federal government’s tax break but a spike in gas prices to start the year offset the government’s relief, with underlying inflation accelerating.
The agency reported prices at the pump jumped 8.6 per cent year-over-year, in large part because of a 25.9 per cent spike in Manitoba, with the province reintroducing its provincial gas tax after a temporary suspension through 2024.
Meanwhile, natural gas prices rose 4.8 per cent annually in January, with an increase in demand pushing prices higher in Ontario and Quebec from an oversupply a year ago, Statistics Canada said.
"The GST holiday meant that headline inflation remained below the two per cent target in January, but there is clear evidence that underlying inflation pressures are building," said Stephen Brown, deputy chief North America economist at Capital Economics, in a note to clients.
"That suggests the Bank of Canada is getting close to the end of its loosening cycle, although the outlook for monetary policy ultimately hinges on whether President (Donald) Trump soon imposes stiff tariffs on imports from Canada."
Barrie's News Delivered To Your Inbox
By submitting this form, you are consenting to receive marketing emails from: Central Ontario Broadcasting, 431 Huronia Rd, Barrie, Ontario, CA, https://www.cobroadcasting.com. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact
The Bank of Canada has brought its benchmark rate down to three per cent, with its latest cut being in January.
Restaurant food prices declined a record 5.1 per cent from a year ago, thanks to the tax break, while alcohol prices dropped 3.6 per cent from the same time last year. The temporary break, however, ended over the weekend.
Without the tax break, Statistics Canada said the annual inflation rate would have accelerated to 2.7 per cent, up from 2.3 per cent in December.
The annual inflation rate continues to face upward pressure from mortgage interest costs, increasing at a rate of 10.2 per cent from a year ago, though this is the 17th consecutive month of deceleration after a peak of 30.9 per cent in August 2023.
With an increasing share of inflation components rising faster than three per cent in January, Royce Mendes, managing director and head of macro strategy at Desjardins, said he's sticking with his belief that the central bank will hold rates steady when it meets again in March, "but that call is still contingent on tariff news and upcoming data releases co-operating."
This report by The Canadian Press was first published Feb. 18, 2025.
