FX.co ★ Canadian Inflation Rate Unexpectedly Eases

Canada’s headline inflation rate eased to 2.3% in January 2026, down from a three‑month high of 2.4% in December and slightly below market expectations that it would remain at 2.4%. The outcome was broadly consistent with the Bank of Canada’s forecast that inflation would hover around 2.5% at the start of the year before slipping below its 2% target, as base effects from the GST/HST reduction in January 2025 continued to weigh on annual readings.

Deflation in transportation prices deepened (-17.0% versus -0.5% in December), driven by a 16.7% drop in gasoline prices. Inflation also slowed for shelter (1.7% versus 2.1%) and for household operations and furnishings (2.5% versus 3.6%). By contrast, price growth accelerated for food (7.3% versus 6.2%), reflecting the unwinding of earlier tax relief, with restaurant meals seeing particularly sharp increases (up 12.3%).

The trimmed-mean core inflation rate declined to 2.4% from 2.7%, below the consensus forecast of 2.6% and marking its lowest level since April 2021.