Inflation Slowed to 2.3 Percent in January Amid Falling Gas Prices, While Food Costs Rose

Canada’s annual inflation rate fell slightly to 2.3 percent in January, a change that Statistics Canada is attributing to lower gasoline prices.

Although inflation stood at 2.4 percent in December, the statistics agency said a 16.7 percent drop in gasoline prices allowed inflation to fall further in January.  Excluding gasoline, the Consumer Price Index (CPI) rose by 3 percent in January, matching the increase seen in December.

Statistics Canada said on Feb. 17 that the prices for food purchased in restaurants were 12.3 percent higher in January compared to a year ago, when a GST break from Dec. 14, 2024 to Feb. 15, 2025, resulted in lower prices. Similarly, alcoholic beverages purchased from stores were 7.9 percent higher than in January 2025, while toys and games rose 8.7 percent, and children’s clothing was up 6.3 percent.

Prices for food purchased from stores rose by 4.8 percent year-over-year in January after a 5 percent increase in December. Statistics Canada said the slower price growth was driven by a 3.1 percent decline in fresh fruit prices in January, after they increased by 4.5 percent in December.

The falling prices of berries, oranges, and melons due to “stable harvests in producer regions” led to the downward pressure on fruits, StatCan said.

The growth in shelter costs has slowed on a year-over-year basis, rising by just 1.7 percent in January, according to the report. The statistics agency said this was the first time in almost five years that the year-over-year shelter price growth was less than 2 percent. This slowdown was influenced by a reduction in mortgage interest rates and a deceleration in rent growth.

The average cost of rent in Canada grew by 4.3 percent in January compared to 4.9 percent in December. Regionally, rent prices increased by 1.8 percent in Saskatchewan and fell by 0.2 percent in Prince Edward Island.

The report said prices for cellular services also rose by just 4.9 percent compared to 14.6 percent in December.

Bank of Montreal chief economist Douglas Porter said the inflation numbers were an “encouraging result” for the Bank of Canada, with inflation nearing its 2 percent target on a “broader basis.”

“There’s still some wood to chop on core inflation, but the shorter term metrics are moderating noticeably,” Porter wrote to clients on Feb. 17, noting that the central bank has said the bar to cut interest rates further is “quite high.” He said the bank could be in a position to further lower interest rates if inflation continues declining.

Conservative Leader Pierre Poilievre wrote on X that food inflation has jumped to 7.3 percent in Canada, which he said is “by far the worst in the G7.” His Feb. 17 post blamed the rise on Ottawa’s increased taxes on fuel, farming, and food processing and the Tory leader promised to write to Prime Minister Mark Carney to demand “emergency reversals” on such policies before Canadians go hungry.”

Carney responded to similar criticism from Poilievre during Question Period on Jan. 27, saying that wages have been rising faster than inflation in Canada. He also pointed out that the Liberal government is seeking to make the National School Food program permanent to provide meals to up to 400,000 more children annually.