Inflation Rises to 2.4 Percent in December: StatCan

The Consumer Price Index rose 2.4 percent compared to last December, driven by the federal government’s tax holiday from the previous year, new data from Statistics Canada shows.

The year-over-year increase in the overall Consumer Price Index (CPI) was influenced by the GST holiday that began on Dec. 14, 2024. This led to monthly reductions in the exempt goods and services, which are no longer part of the year-over-year trend, resulting in increased pressure on the headline CPI growth, StatCan said.

The tax break between Dec. 14 and Feb. 15 was a measure implemented by the Justin Trudeau Liberals to bring down the cost of “holiday essentials” such as snacks and prepared foods. Restaurant meals, beer, wine, and certain items for children such as clothing, footwear, diapers, and toys were exempt from GST and HST during the two-month period.

StatCan reported that the most significant factor in last month’s CPI increase was the rise in restaurant prices, with food purchased from restaurants experiencing an 8.5 percent increase.

Some grocery items including potato chips and confectionary goods were also included in the tax holiday and saw annual price jumps in December, the agency said.

Prices for alcoholic beverages served in licensed establishments and sold in stores also grew at a faster pace in December as did the price for toys, hobby supplies, and children’s clothing.

In general, the cost of food purchased from grocery stores increased by 5 percent each year; however, StatCan reported that price levels remained largely stable on a monthly basis. Inflation in grocery stores has been on the rise in recent months, with a year-over-year increase of 4.7 percent recorded in November.

The agency said the price of coffee and cost of fresh or frozen beef “remained the largest contributors to the increase,” jumping 30.8 percent and 16.8 percent in December, respectively.

The inflation rise in December was counterbalanced by a 13.8 percent reduction in gasoline costs, StatCan noted. This decrease was linked to a worldwide surplus of crude oil, which contributed to lower prices, it said.

Airfare prices rose by 34.5 percent on a monthly basis, exceeding the holiday price rise of the prior year, despite a marginal year-over-year reduction in air transportation costs, StatCan said.

The cost of travel tours also rose month-over-month, which StatCan attributed to a higher cost to travel to U.S. destinations.

The December inflation statistics will serve as the Bank of Canada’s final assessment of price trends before it renders its first interest rate decision of the year on Jan. 28. The central bank held interest rates steady at 2.25 percent in December.

The CPI monitors fluctuations in the prices of a predetermined set of goods and services, illustrating the variations in consumer purchasing power over time, gauging inflation or deflation for consumers.

Reaction

A poll of economists heading into today’s data report  from StatCan had expected the annual inflation rate would hold steady at November’s rate of 2.2 percent. They said the change should have little impact on Canada’s central bank, however.

ScotiaBank economist Derek Holt said the figures announced today are unlikely to spur the Bank of Canada to make any changes in its benchmark interest rate.

“Given that the BoC has been telling markets it’s done with rate adjustments barring big developments, smoothed figures like these won’t change their mindset,” Holt said in a Jan. 19 note to investors.

Bank of Montreal chief economist Douglas Porter said the central bank will likely be encouraged by the pullback in most core CPI measures, despite the headline rate coming in higher than expected.

“There certainly is not enough here to push the BoC toward more cuts,” he wrote on Jan. 19. “It would take a serious deterioration in the economy and some further signs of core inflation decelerating to again open the door for renewed policy easing—we’re simply not there yet.”

CIBC senior economist Andrew Grantham agreed. His Jan. 19 note to investors said underlying inflation is not strong enough to justify speculation that the Bank of Canada may be forced to raise interest rates before the end of the year.

“We continue to forecast no change in the policy rate during 2026,” he said.