Canadian Inflation (December 2025)

Canadian inflation firmed modestly at year-end. The Consumer Price Index (CPI) rose 2.4% year-over-year in December, up from 2.2% in November. On a seasonally adjusted monthly basis, CPI increased 0.3%, equivalent to an annualized pace of 3.7%. Excluding gasoline, inflation climbed to 3.0%, a 0.4-point increase from the prior month.

Food prices remained a key driver, rising 6.2% year-over-year, reflecting base-year effects from last year’s temporary tax break on restaurant meals, alongside continued upward pressure on grocery prices. In British Columbia, consumer prices increased 1.7% year-over-year, down 0.5 points from November, signaling softer regional inflation trends.

The Bank of Canada’s preferred core inflation measures showed improvement. Median inflation eased to 2.5%, while trimmed mean inflation declined to 2.7%, both on a year-over-year basis—suggesting underlying price pressures are gradually cooling.

Much of December’s headline inflation strength can be attributed to base-year effects stemming from the prior GST/HST holiday, partially offset by continued declines in gasoline prices. Encouragingly, three-month annualized core inflation fell to approximately 1.65%, its lowest level since Spring 2024 and now below the midpoint of the Bank of Canada’s target range.

Looking ahead, we expect the Bank of Canada to hold rates at its upcoming meeting, as policymakers assess recent disinflation progress alongside fourth-quarter economic growth relative to their latest forecasts.