• MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • All
  • COVID-19
  • Finance
  • Housing Market

Published by Sherry Cooper

February 18, 2025

Canadian Inflation Edged Upward to 1.9% Y/Y in January.

  Canadian Inflation Edged Upward to 1.9% Y/Y in January

In January, the Consumer Price Index (CPI) rose by 1.9% year over year (y/y), up from 1.8% in December. This rise was primarily due to an uptick in energy prices. Excluding gasoline, the CPI increased by 1.7% in January, down from 1.8% in December.

Higher energy prices, particularly gasoline and natural gas were the main contributors to this acceleration. However, these increases were somewhat countered by continued downward pressure on prices for items affected by the goods and services tax (GST)/harmonized sales tax (HST) break implemented in December. Notably, food prices fell by 0.6% year-over-year in January, marking the first annual decline since May 2017. This decrease was primarily driven by a significant drop in prices for food purchased from restaurants, which fell by 5.1%.

The CPI rose by 0.1% in January, compared to a 0.4% decline in December.

Energy prices rose 5.3% in January y/y, following a 1.0% increase in December. Specifically, gas prices increased 8.6% yearly in January, up from 3.5% in December. In Manitoba, gas prices rose by 25.9% due to the reintroduction of a provincial gas tax at a lower rate after its temporary suspension from January to December 2024.

Additionally, prices for new passenger vehicles increased by 2.3% year-over-year in January, compared to a 0.9% increase in December. In contrast, prices for used vehicles continued to decline in January, decreasing by 3.4%, although slower than the 4.1% decline observed in December. This marks the 13th consecutive month of year-over-year price decreases for used vehicles.

In January 2025, prices for food purchased from restaurants decreased by 5.1%. This decline was over three times greater than the previous record drop of 1.6% observed in December 2024. 

Canadians also experienced lower prices for alcoholic beverages purchased from stores, which fell by 3.6% in January 2025 compared to January of the previous year, following a decrease of 1.3% in December.

Additionally, prices for toys, games (excluding video games), and hobby supplies dropped by 6.8% year over year in January after a decline of 7.2% in December.

Excluding indirect tax changes, inflation notably increased to 2.6% from 2.2% the prior month and a recent low of 1.5% last September. It was a similar story for core inflation—BoC’s main measures rose 0.2% m/m in adjusted terms, lifting both to 2.7% y/y (from 2.5% for trim and 2.6% for median). Over the past three months, both have risen at just over a 3% annualized pace, or just a touch above the BoC’s comfort zone. The Bank’s old CPIX measure of core, which removes eight volatile items and sales taxes, perked up to a 2.1% y/y pace but remains mild. Similarly, the breadth of prices rising above 3% is close to normal.

It’s a little less flashy, but more importantly, shelter inflation continues to grind down gradually. Rents posted their first monthly decline in more than two years (-0.1%), calming the annual increase to 6.3% (from 7.1% last month and a peak of 9% last spring). Mortgage interest costs eased to 10.2% y/y from 11.7% in December and the plus-30% pace in 2023. Offsetting those milder trends were big pick-ups in many utility charges.

Bottom Line
Traders in overnight swaps have reduced their expectations for a quarter-percentage point rate cut by the Bank of Canada at its next meeting on March 12, lowering the odds to just over one-third, down from a nearly even chance last week.

Bank of Canada Governor Tiff Macklem has successfully brought inflation under control. However, an impending tariff war between the U.S. and Canada poses a new threat to his efforts to maintain price stability.

Policymakers eased up on the pace of rate cuts in January after aggressively lowering borrowing costs last year, but they remain uncertain about the future direction. U.S. President Donald Trump has indicated plans to impose tariffs of up to 25% on Canadian goods in March, while Prime Minister Justin Trudeau’s government has promised to retaliate. A tariff war would likely compel the central bank to adjust its rate-cutting strategy to prepare the economy for the potential impact of tariffs on consumer prices.

The central bank will next determine the benchmark overnight rate on March 12. Economists are divided into two viewpoints: some anticipate further rate cuts, while others expect the bank to pause amid increasing uncertainties. Governor Tiff Macklem has expressed a desire to bolster economic growth and expects inflation to remain close to the 2% target in the coming months, influenced by fluctuations in global energy prices. Currently, the odds favor another 25 basis points rate cut in March.

Please Note: The source of this article is from SherryCooper.com/category/articles/

Share this:
Categories: Finance

Recommended articles.

View More

In Conversation with Dr. Sherry Cooper (September 2025)

September 17, 2025

Dr. Sherry Cooper joined Dominion Lending Centres and DLCG Mortgage Group President, Eddy Cocciollo, for In Conversation to discuss the latest updates from the Bank of Canada as of September 17, 2025.

Read More

The Bank of Canada Lowers the Policy Rate By 25 Basis Points to 2.5%

September 17, 2025

Bank of Canada Lowers Policy Rate to 2.5% Today, the Bank of Canada lowered the overnight policy rate by 25 bps to 2.5% as was widely expected. Following yesterday’s better-than-expected […]

Read More

Headline Inflation Rises Less Than Expected, Giving the Green Light to BoC Easing

September 16, 2025

Canadian Inflation More Muted Than Expected, Giving the Green Light for BoC Easing Tomorrow The Consumer Price Index (CPI) rose 1.9% on a year-over-year basis in August, up from a 1.7% increase […]

Read More

Canadian Housing Market Turns the Corner in August

September 15, 2025

Canadian Home Sales Post Best August In Four Years Today’s release of the August housing data by the Canadian Real Estate Association (CREA) showed good news on the housing front. The […]

Read More

Employment data for August came in weaker than expected in both Canada and the US

September 5, 2025

Weak August Jobs Report in Canada Bodes Well for a BoC Rate Cut Today’s Labour Force Survey for August was weaker than expected, indicating an excess supply in the labour […]

Read More
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert

© 2025 Dominion Lending Centres Inc. All rights reserved. Privacy Policy Terms & Conditions