CPI revealed 12 months after controversial tax break
Canada’s inflation rate rose to 2.4 per cent in December, despite expectations that it would hold at 2.2% in December, Comparisons have been skewed somewhat due to a December 2024 “tax holiday” that temporarily pulled down prices on household items, creating an uneven baseline for this year’s annual reading.
Statistics Canada published December consumer price data Monday. A Reuters survey of economists expects the annual inflation rate held steady at 2.2% in December, according to LSEG Data & Analytics.
StatCan highlighted the GST/HST tax break in Decmber 2024 in noting why inflation had ticked up somewhat in December 2025. Significant declines in the price of gasoline continued in December, which brought down CPI. Excluding gasoline, CPI rose by 3.0 per cent in December.
Before the announcement, BMO economist Benjamin Reitzes said he expected inflation ticked up to 2.3% in December despite a heavy drop in gasoline prices last month. He said the end of the year is typically a season for discounts, but prices dropped more sharply in December 2024 when the federal government’s temporary “tax holiday” took effect mid-month and cut prices on a range of household goods. Reitzes said that could show a jump in grocery prices in annual comparisons and that recent producer price trends suggest food inflation will keep accelerating in the months ahead. Reitzes said the December inflation figures are “unlikely” to shift the Bank of Canada from the sidelines at its first interest rate decision of the year later this month.
Recent CPI releases show why economists have focused on base effects and underlying measures. Statistics Canada reported the CPI rose 2.2% year over year in November 2025, matching October, while CPI excluding gasoline rose 2.6% for the third consecutive month. Grocery inflation rose to 4.7% year over year in November, following 3.4% in October, and gasoline was down 7.8% from a year earlier.
On October inflation, Reuters reported that Canada’s annual rate eased to 2.2%, with gasoline prices down 9.4% year over year and mortgage interest costs rising 2.9%, the first time in more than three years that measure came in below 3%. Statistics Canada also said CPI-median was 2.9% and CPI-trim was 3.0% in October.
Market economists have pointed to the same mechanics behind the December setup. In commentary published following November CPI, Oxford Economics senior Canada economist Michael Davenport wrote: “Headline inflation will likely bounce around in the low 2% range in the near term, as unfavorable base effects from last year’s GST [Goods and Services Tax] holiday start to temporarily boost food inflation in December.”
Statistics Canada’s Consumer Price Index Annual Review 2024 showed inflation cooled through last year: the annual average CPI rose 2.4% in 2024, down from 3.9% in 2023. Excluding energy, CPI rose 2.6% in 2024 compared with 4.5% in 2023. Goods slowed to 0.3% from 3.2%, services rose 4.1% from 4.6%, shelter increased 5.7%, and rent rose 8.2%.
