Canada’s consumer price index rose 2.4 per cent year over year in December 2025, up from 2.2 per cent in November, Statistics Canada reported Monday, January 19, 2026. The increase was driven mainly by the December 2024 GST/HST break falling out of the annual comparison, while grocery prices rose five per cent and gasoline fell 13.8 per cent.
A tax break echoes a year later
The main force behind December’s increase was not new price pressure but arithmetic. The prices in the consumer price index include sales taxes, and the federal GST/HST break that ran from December 14, 2024, to February 15, 2025, temporarily lowered prices on about 10 per cent of the CPI basket. With those discounted prices now falling out of the year-over-year comparison, the annual rate moved up.
The effect showed up most clearly in the items the tax break covered. Prices for food purchased from restaurants rose 8.5 per cent year over year in December, compared with 3.3 per cent in November, making restaurant meals the largest contributor to the acceleration. Alcoholic beverages rose 6.5 per cent at licensed establishments and 5.6 per cent at stores. Toys, games and hobby supplies jumped 7.5 per cent after falling in November, and children’s clothing rose 4.8 per cent. Among groceries, potato chips and other snack products rose 7.9 per cent and confectionery 14.2 per cent.
Economists polled ahead of the release had expected inflation to hold at November’s 2.2 per cent, so the uptick came as a mild surprise — though one most attributed to the calendar rather than to the economy overheating.
Groceries keep climbing
Food purchased from stores rose 5.0 per cent year over year in December, accelerating from 4.7 per cent in November, even though grocery prices were unchanged from November to December. Coffee, up 30.8 per cent, and fresh or frozen beef, up 16.8 per cent, remained the largest contributors to the increase.
Gasoline pulls the other way
Cheaper fuel kept the headline number from rising further. Gasoline prices fell 13.8 per cent year over year in December, a steeper drop than November’s 7.8 per cent, as prices fell 7.1 per cent in the month and crude oil declined to its lowest point in over four years amid a global oversupply. Excluding gasoline, the CPI rose 3.0 per cent in December.
Air transportation prices were 0.8 per cent lower than a year earlier, a smaller decline than in November, after a 34.5 per cent monthly jump in December that was larger than the usual holiday increase. Overall, the CPI fell 0.2 per cent in the month, though it rose 0.3 per cent on a seasonally adjusted basis.
Desjardins noted one further quirk in the data: without the elimination of the consumer carbon tax, December’s headline rate would have been about 0.4 percentage points higher, at 2.8 per cent.
Little pressure on the Bank of Canada
Underneath the headline, the trend pointed the other way. The Bank of Canada’s preferred core measures cooled for a third consecutive month: CPI-median eased to 2.5 per cent and CPI-trim to 2.7 per cent, their lowest levels since December 2024. Desjardins calculated that the three-month annualized pace of the Bank’s preferred measures slowed to 1.7 per cent in December, below the Bank’s two per cent target.
The December figures were the Bank’s last look at inflation before its first interest rate decision of 2026, scheduled for the following week. The central bank held its policy rate at 2.25 per cent in December. Given the role of the tax-break comparison — which will affect January’s reading, due February 17, for a full month — economists saw little in the report to push the Bank off the sidelines.
