MENA Newswire, OTTAWA: Canada’s annual inflation rate rose to 2.4% in December, up from 2.2% in November, as some year-over-year comparisons were pushed higher by the absence of a temporary GST/HST exemption that had lowered certain prices a year earlier, Statistics Canada reported Monday. The result came in above expectations for inflation to hold steady, while broader measures of underlying price pressures continued to ease.
On a monthly basis, the consumer price index fell 0.2% in December, indicating prices declined from November levels. Statistics Canada said several categories that had been affected by the tax exemption in December 2024 showed faster year-over-year increases in December 2025, including restaurant food and other selected consumer items. The data underscored how base effects can influence headline inflation even when monthly price growth is subdued.
Key core inflation gauges watched by the Bank of Canada cooled for a third straight month. CPI-median eased to 2.5% year over year and CPI-trim slowed to 2.7%, both near their lowest readings since late 2024. Excluding food and energy, inflation was 2.5% in December, a measure often used to track underlying price trends without the most volatile components.
Energy continued to be a major counterweight to overall inflation. Gasoline prices were down 13.8% from a year earlier, helping restrain the headline rate despite increases in several service categories. Goods inflation slowed to 1.2% year over year, while services inflation accelerated to 3.3%, reflecting continued pressure in parts of the economy tied to labor and operating costs.
Tax holiday base effects lift headline rate
Statistics Canada highlighted that the December 2024 GST/HST exemption affected a range of indexes, contributing to a higher year-over-year inflation rate when those comparisons dropped out. Items cited as influenced by the earlier exemption included restaurant food and certain consumer goods, as well as some grocery products. Food prices remained a notable contributor to inflation, with grocery prices rising about 5% from a year earlier, according to the agency’s breakdown.
The December report also provided context for inflation over the full year. Statistics Canada said the annual average inflation rate for 2025 was 2.1%, down from 2.4% in 2024, aligning more closely with the Bank of Canada’s 2% target. The combination of a slightly higher headline rate and softer core measures reinforced the picture of inflation that is no longer broadly accelerating across categories.
The mixed inflation signal arrived as the Bank of Canada maintained its policy rate at 2.25% in December, after a series of earlier cuts. Financial markets and economists have focused on whether easing in core measures is sustained as the central bank weighs inflation trends against overall economic conditions. In currency trading after the release, the Canadian dollar strengthened modestly against the U.S. dollar.
Core measures ease as gasoline drags
In detailed components, the decline in gasoline remained one of the largest year-over-year offsets to price growth elsewhere, while services inflation stayed elevated compared with goods. The December figures showed a headline rate above November’s level, but the core measures suggested underlying inflation pressures continued to cool. The next policy decision will be watched closely for how officials interpret the divergence between headline inflation and the measures designed to filter out short-term volatility.