Canada experienced a slight increase in its annual inflation rate, reaching 2.4 percent in December compared to the same period the previous year. This uptick followed the conclusion of a temporary tax cut that had been in effect since December 14, 2024, causing prices to rise. The December inflation rate was slightly higher than November’s 2.2 percent, with gas prices declining year-over-year. Excluding energy, inflation climbed to three percent in December.
The Bank of Canada closely monitors core inflation measures, which exclude volatile components like gas prices. Despite some fluctuations throughout the year, most inflation indicators now align closely with the Bank of Canada’s target of around 2.5 percent.
In December, prices for travel tours dropped by 3.2 percent compared to the previous year, while air transportation costs decreased by 0.8 percent. Transportation prices saw a significant increase of 34.5 percent in December compared to November, surpassing previous years’ holiday season hikes.
Grocery prices remained stable from November to December but surged by five percent compared to the previous year, driven by increases in coffee and fresh or frozen beef prices. Despite headline inflation exceeding expectations, core inflation measures showed a more moderate trend, providing some reassurance to the Bank of Canada.
The annual review of consumer prices for 2025 by Statistics Canada revealed a 2.1 percent increase in inflation on an annual average basis, marking the smallest rise since 2020. Excluding energy, prices rose by 2.6 percent in 2025, similar to the previous year. Services prices grew at a rate of 3.1 percent, primarily influenced by slower growth in mortgage interest costs due to the Bank of Canada’s interest rate cuts.
Goods prices experienced a higher growth rate in 2025, with durable goods, such as passenger vehicles, driving the increase. Grocery prices also rose more rapidly at 3.5 percent, with coffee, cocoa beans, and sweets contributing to the hike. Weather-related changes and tariffs on producing countries affected coffee, cocoa beans, and sweets prices.
Meat prices surged by 5.8 percent, particularly fresh and frozen beef, due to low North American cattle inventories. Restaurant dining costs increased by 2.6 percent in 2025, slightly lower than the previous year’s rate.