Statistics Canada says lower prices at the pump and easing shelter inflation helped rein in the pressure facing consumers in January.
The agency said Tuesday that the annual rate of inflation ticked down to 2.3 per cent last month. Economists had expected inflation to hold steady at 2.4 per cent.
StatCan said gas prices were 16.7 per cent lower year-over-year in January, largely thanks to the end of the consumer carbon price in April.
That decline helped offset food inflation, which accelerated to 7.3 per cent annually in January.
StatCan said a jump of 12.3 per cent in the cost of restaurant meals year-over-year drove the increase.
That surge was mostly tied to the federal government’s “tax holiday” taking full effect a year earlier. January 2025 marked the only full month of Ottawa’s temporary tax reprieve, which removed a portion of the sales tax on dining out and a variety of goods, and annual comparisons are somewhat distorted as a result.
Prices for alcohol, children’s clothes, toys and games also jumped year-over-year due to the “tax holiday” effect.
Costs for food from the grocery store, meanwhile, rose 4.8 per cent annually in January, slowing from a price hike of five per cent in December. StatCan said prices for fresh fruit fell 3.1 per cent in the month as stable growing seasons in producer regions eased prices for berries, oranges and melons.
Shelter inflation – long a stubborn fuel in the consumer price index – also continued its easing path to start the year.
Slower price growth for rent and mortgage interest costs meant shelter prices rose 1.7 per cent annually in January, the first time in almost five years this figure has been below two per cent.
Leslie Preston, TD senior economist, said in a note to clients Tuesday that the January inflation report is consistent with the bank's view that price pressures will continue to moderate through the year "as past inflation problem areas, like rents, continue to cool."
Preston said the Bank of Canada's measures of underlying inflation cooled in January and core metrics were running below the central bank's two per cent target on a three-month basis.
StatCan’s January price report marks the Bank of Canada’s first look at inflation data since the central bank held its benchmark interest rate steady at 2.25 per cent last month.
BMO chief economist Doug Porter said in a note to clients Tuesday that progress on the central bank's preferred core inflation metrics in January will be encouraging.
He said the bar for the bank to cut its policy rate again is high as central bank officials warn there is little more monetary policy can do to support the economy through its trade-driven structural transition.
Porter also argued an eventual cut isn't completely off the table.
"Even so, if inflation continues to decelerate, the bank could be in position to support the economy should growth truly struggle as it undergoes a structural shift," he said.
The Bank of Canada will get another look at inflation dynamics for February before its next decision on March 18.
Picture Courtesy: THE CANADIAN PRESS/Patrick Dell
