Canada's annual inflation in January edges up to 1.9%, core measures also up

Reuters

18-02-2025

Summary
Prices in January come down due to sales tax holiday
Gasoline, natural gas, passenger vehicles cost up
On a monthly basis, consumer price index was up 0.1%
OTTAWA, Feb 18 (Reuters) - Canada's annual inflation rate in January rose a notch higher to 1.9% from December as lower prices helped by a sales tax reprieve were partly offset by higher cost of gasoline and natural gas, data showed on Tuesday.
The core measures of the consumer price index, which have not declined as fast as the inflation rate in the past few months, edged up too.
The January CPI racked up a six month record of inflation being at or below the 2% mark, the mid-point of the Bank of Canada's 1-3% inflation target range.
Analysts polled by Reuters had predicted annual inflation to rise to the reported level from 1.8% in December. On a monthly basis, prices were up 0.1%, Statistics Canada said.
The government had announced a sales tax holiday on a range of products such as food, beverages, eating at restaurants, children's clothing, etc. from mid-December to mid-February, and these have put downward pressure on inflation, it said.
Prices for the food component in the CPI basket fell 0.6% on a year-over-year basis in January, its first yearly decrease since May 2017, driven by a record 5.1% decline in prices for food purchased from restaurants, the data showed.
Without the tax relief, consumer prices would have risen at a rate of 2.7%, Statscan said. In December, excluding the tax break, prices were up 2.3%.
Economists have said that the sales tax break had distorted overall inflation numbers and core inflation was a more accurate gauge of consumer price trend.
The BoC has two preferred measures of core inflation - CPI-median and CPI-trim.
CPI-median - or the centermost component of the CPI basket when arranged in an order of increasing prices - rose to 2.7% from an upwardly revised 2.6% in December. CPI-trim - which excludes the most extreme price changes - was up to 2.7% from 2.5% in the prior month.
The upward pressure on inflation in December was led by an 8.6% jump in prices paid by Canadians at fuel pumps, Statscan said.
The pressure was further boosted by a 4.8% rise in natural gas prices and the first year-over-year rise in eight months of passenger vehicles.
As prices have stayed at or below the BoC's 2% target, it has helped it to ease interest rates most aggressively amongst the G7 nations. Last month it reduced the key policy rate to 3%.
Currency markets now see over 44% chance of another 25 basis point rate cut on March 12, but if U.S. President Donald Trump decides to slap tariffs on Canadian imports from March, market bets could change considerably.