Canada’s YoY Inflation Slows to 2.3 Percent in January

OTTAWA, Feb. 17, 2026 — Canada’s year-over-year inflation rate eased to 2.3 per cent in January 2026, down from 2.4 per cent in December, as a large decline in gasoline prices played a major role in lowering the headline consumer price index. Economists had expected inflation to remain at 2.4 per cent, but the stronger than anticipated drop in energy costs influenced the outcome. Gasoline prices were 16.7 per cent lower for the year ending in January, compared with a 13.8 per cent decline in December, and that shift was the primary driver of the softer annual inflation reading. Consumers saw little change in the overall consumer price index from December to January, which reflects how volatile components such as fuel can affect the year-over-year comparison.

Core Components Diverge

Food Prices Climb Faster: While gasoline costs eased, food prices continued to rise sharply, with grocery costs up roughly 4.8 per cent compared with January 2025. Restaurant meal prices jumped more than 12 per cent year-over-year. Analysts note that last year’s temporary federal tax holiday on dining and certain goods makes the comparisons appear higher than usual. These increases mean households still face elevated expenses for everyday meals despite lower energy costs.

Other Goods See Notable Increases: Alcoholic beverages, children’s clothing, toys and games also recorded above-average annual price gains. Many of these increases reflect residual effects from last year’s tax holiday, which trimmed the sales tax on a range of products and left current comparisons looking larger by contrast. Consumers continue to manage higher costs in multiple categories even as gasoline and shelter costs ease.

The broader CPI excluding gasoline rose roughly 3.0 per cent for the year to January, matching the pace seen in December according to Statistics Canada. That persistent rise illustrates that consumers are still paying more for many everyday items even as energy costs shrink.

Shelter and Services Costs

Costs for shelter, which include rent and mortgage interest, rose at a more modest rate of about 1.7 per cent year-over-year in January, marking one of the slower increases in nearly five years. This slower growth in shelter prices helped keep the overall annual rate lower. Consumers also faced higher prices for services in addition to food, including items such as personal care and household goods. Those expenses contribute to ongoing challenges for families managing budgets even as fuel costs fall.

Bank of Canada Stance and Markets

The inflation results come as the Bank of Canada continues to hold its policy interest rate at 2.25 per cent, a level maintained in recent meetings as officials weigh data on price growth against the broader economy. Traders moved the Canadian dollar lower against the U.S. dollar after the inflation release, and yields on short-term government bonds moved down as markets reacted to the cooler inflation outcome. Some analysts suggest that the softer inflation figure could open the door to interest rate reductions later in 2026 if future data show further moderation in price growth, though policy makers have been cautious to alter the current rate without more evidence that inflation will hold near target.

What This Means for Households

For Canadian households, the inflation environment remains mixed. Lower gasoline prices meant less at the pump for many drivers during the first month of the year, while slower growth in shelter costs eased a long-standing component of household expenditure. However, bigger increases in food and services continued to strain budgets, especially for families who spend a larger share of income on everyday necessities. Measures that strip out highly variable categories like food and fuel show inflation a bit higher than the headline number, reinforcing the view that not all sectors have cooled at the same rate. The consumer price index excluding food and energy rose 2.4 per cent year-over-year in January, slightly lower than the prior month but still above where many Canadians would feel comfortable.

Annual inflation figures may look choppy in coming months because year-ago comparisons include periods affected by last year’s tax holiday and other transitional factors. The latest report shows that overall price growth has moderated from its recent peaks and remains near the level the Bank of Canada has targeted for much of its recent policy deliberations.