Canada’s annual inflation rate rose to 2.4 percent in December compared to the same period last year, due to the conclusion of a temporary tax cut that had been in effect for two months starting in December 2024. This led to an acceleration in price growth last month, pushing the rate slightly higher than the 2.2 percent seen in November. Excluding energy, inflation climbed to three percent in December, up from 2.6 percent in November.
The Bank of Canada monitors core inflation measures that exclude volatile elements like gas prices and tax-related changes. In December, two of these measures declined. Most measures of inflation are now hovering around 2.5 percent, aligning closely with the Bank of Canada’s perspective on underlying inflation trends.
In December, travel tour prices dropped by 3.2 percent compared to the previous year, while air transportation prices fell by 0.8 percent. Despite the usual rise in transportation prices during the holiday season, the rate surged by 34.5 percent in December compared to November, surpassing previous year-end increases. Grocery prices remained stable from November to December but increased by five percent compared to the same period last year, driven by higher costs of coffee and fresh or frozen beef.
The annual review of consumer prices for 2025 showed a 2.1 percent increase in inflation on an average annual basis, lower than the 2.4 percent rise in 2024. Excluding energy, prices rose by 2.6 percent in 2025, the same as the previous year. Services prices grew by 3.1 percent, led by slower growth in mortgage interest costs due to interest rate cuts by the Bank of Canada. Shelter prices, including rent, experienced a general slowdown in growth.
Goods prices increased at a higher rate in 2025 compared to the previous year, with passenger vehicles and grocery items such as coffee, cocoa beans, and sweets driving the growth. Weather-related changes and U.S. tariffs impacted the prices of coffee, cocoa beans, and sweets. Meat prices surged by 5.8 percent, particularly fresh and frozen beef, due to low North American cattle inventories. Restaurant prices rose by 2.6 percent in 2025, slightly lower than the 3.6 percent increase in 2024.