Inflation ticks up to 2.4% in December as last year’s GST break impacts

Canada’s annual inflation rate ticked up to 2.4 per cent in December compared to the same period last year, when the federal government implemented a GST break that brought some prices down, Statistics Canada said on Monday.

The temporary tax cut, which began on Dec. 14, 2024, lasted for two months. It reverberated through monthly inflation data for part of 2025 but officially fell out of the year-over-year movement last month, sending price growth accelerating, according to the data agency.

December’s rate was a smidge higher than the 2.2 per cent rate seen in November. It was partly offset by a year-over-year decline in gas prices. With energy excluded, inflation rose to three per cent in December (after a 2.6 per cent jump in November).

The Bank of Canada watches measures of core inflation, which strip out volatile elements like gas prices or tax-related changes from the data. Two of those measures fell in December.

“Perhaps the main takeaway here is that after a year of some wide divergences, almost all of the main measures of inflation are now very close to [2.5 per cent], in tune with the Bank of Canada’s view on the pace of underlying inflation,” wrote BMO chief economist Douglas Porter.

Prices for travel tours fell 3.2 per cent in December compared to the same period last year, while the price of air transportation fell 0.8 per cent.

While StatsCan notes that transportation prices usually rise during the holidays, the rate increased 34.5 per cent in December compared to November — larger than previous increases during the final month of the year.

Grocery price growth was unchanged between November and December but rose to five per cent when compared to the same time last year, with coffee and fresh or frozen beef still driving the increase.

“While the headline rate was above expected, the details were somewhat softer, and the Bank will likely be encouraged by the pullback in most core [inflation] measures,” Porter said in his note to clients.

“However, there certainly is not enough here to push the BoC toward more cuts. It would take a serious deterioration in the economy and some further signs of core inflation decelerating to again open the door for renewed policy easing — we’re simply not there yet,” he wrote.

Inflation rose 2.1% on annual average basis

Alongside December’s inflation report, Statistics Canada also released its annual review of consumer prices for 2025.

Inflation rose 2.1 per cent on an annual average basis last year, after a 2.4 per cent increase in 2024. It was the smallest annual average increase since 2020, though prices have still risen 19.9 per cent over the last five years, the data agency said.

With energy excluded, prices rose 2.6 per cent in 2025, the same as the year before.

The price of services…