Canada’s inflation rate moved higher in December, coming in above expectations. However, beneath the headline number, price pressures continued to cool in key areas that matter most to the Bank of Canada.
🔢 Headline Inflation Comes in Hotter Than Expected
Statistics Canada reported that annual inflation rose to 2.4% in December, up from 2.2% in November.
Economists had largely expected inflation to hold steady, so the increase surprised markets slightly.
One key reason for the jump was the GST/HST holiday, which had temporarily lowered prices in December 2024. With that comparison now falling away, inflation appeared higher year over year.
🧠Core Inflation Trends Are More Reassuring
While the headline number grabbed attention, economists emphasized that core inflation continued to slow, which is more important for monetary policy decisions.
Several analysts noted that most underlying CPI measures softened, even as the overall rate increased.
🏦 What This Means for Interest Rates
Despite the higher inflation print, economists do not see this report as a reason for rate cuts.
• The headline increase was influenced by temporary factors
• Core inflation is trending lower
• Underlying price growth remains subdued
With these conditions, many analysts expect the Bank of Canada to stay on hold, unless the economy weakens significantly or core inflation slows further.
📉 Monthly Inflation and Energy Prices
On a month-over-month basis:
• CPI fell 0.2%
• Seasonally adjusted CPI rose 0.3%
Gasoline prices played a major role in keeping inflation from rising further:
• Gas prices dropped 7.1% from November
• Down 13.8% compared to last year
Excluding gasoline, prices were up 3% year over year.
Statistics Canada also noted that global oil prices are at their lowest levels in over four years, driven in part by excess supply.
🍽️ Food, Dining, and Travel Costs
Some categories saw notable increases:
• Restaurant prices rose 8.5%, reflecting the end of the GST/HST holiday
• Grocery prices increased 5%, with coffee and beef leading gains
Other mixed signals included:
• Airfares jumped during the holiday season month to month but were slightly lower than last year
• Hotel prices fell 10.8% year over year
🏠Housing and Services
• Rent prices increased 4.9% annually
• Mortgage interest costs rose just 1.7%, continuing their slowdown
• Telephone service prices surged 13%, the largest annual jump in decades
🌍 Provincial Picture
Inflation rose in nine out of ten provinces.
British Columbia was the exception, where inflation slowed due to sharply lower hotel prices compared to December 2024, when major concert events had pushed accommodation rates much higher.
Economic data like inflation plays a big role in interest rate decisions, but it’s only part of the story.
At Garland Mortgage, we look beyond the headlines to help you plan with confidence.
Questions about your mortgage? Our team is always happy to help.
