FX.co ★ Canadian Inflation Rises to 8-Month High on Tax Break End

In February 2025, Canada's annual inflation rate surged to 2.6%, rising from 1.9% in January. This marks the highest rate in eight months and exceeded market predictions of 2.2% as well as the Bank of Canada's projection of 2.5%. The primary reason for this jump was the cessation of the goods and services tax (GST) and harmonized sales tax (HST) breaks midway through the period, which led to significant price increases for eligible goods. As a result, inflation in restaurant pricing slowed considerably (-1.4% compared to -5.1% in January), and the cost of alcoholic beverages purchased from stores also saw a smaller decline (-1.4% compared to -3.6%), causing the food subindex to experience a sharp rebound (1.3% compared to -0.6%). Additionally, prices for clothing and footwear showed an upswing (1.4% compared to -1.3%) and further accelerated in sectors related to recreation, education, and reading (3.7% compared to 1.9%). On a monthly basis, the conclusion of tax credits spurred a notable 1.1% rise in the Consumer Price Index (CPI), representing the most significant increase since May 2022.