Canada’s inflation ticked up to 2.4% in December, core measures continued to cool
Headline inflation rose to 2.4 per cent in December largely because of last year’s temporary sales tax break, while CPI-median and CPI-trim eased for a third month.
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By Torontoer Staff
Consumer prices in Canada rose 2.4 per cent year over year in December, slightly above market expectations, driven largely by a base-year effect from a temporary sales tax break in the comparable month of 2024. On a monthly basis the consumer price index fell 0.2 per cent.
The headline uptick came despite cooling in the Bank of Canada’s preferred measures of underlying inflation, with CPI-median and CPI-trim both easing for a third straight month. Markets had expected inflation to hold at the November rate of 2.2 per cent.
Why headline inflation rose in December
The main technical driver was the temporary sales tax relief that applied to certain food and children’s items in December 2024. That policy cut the base used for year-over-year comparisons, making prices appear higher in December 2025 even though some underlying price pressures are moderating. Restaurant prices, which were affected by the tax holiday, were the single largest contributor to the acceleration in the annual rate.
- Gasoline fell 13.8 per cent year over year in December, moderating the rise in the headline rate.
- Grocery prices were unchanged month to month, but up 5.0 per cent year over year.
- Excluding food and energy, inflation rose 2.5 per cent year over year.
- Services inflation accelerated to 3.3 per cent in December, from 2.8 per cent in November.
- Goods prices rose 1.2 per cent, down from a 1.5 per cent increase the prior month.
Core measures continued to cool
The Bank of Canada’s two preferred core measures both declined. CPI-median, which tracks the middle value of monthly price changes, cooled to 2.5 per cent from 2.8 per cent in November. CPI-trim, which strips out the most extreme price moves, fell to 2.7 per cent from 2.9 per cent. Those readings were the lowest since December 2024.
The moderation in these underlying gauges reduces near-term pressure on monetary policy. The Bank left its policy rate at 2.25 per cent in December and indicated that level was consistent with bringing inflation close to its 2 per cent target. Money markets currently expect rates to remain on hold through 2026.
What this means for households
Even with a softer profile in core inflation, consumers still feel uneven price pressure. Grocery costs rose on the year, and services, which include rents, personal services and many household-facing sectors, are accelerating. The decline in gasoline prices provided relief for some households, but higher restaurant prices last month added to food-service costs.
For people watching interest-rate-sensitive expenses, the Bank’s pause and the easing in core measures suggest less likelihood of near-term rate hikes. That reduces the chance of further immediate increases to mortgage rates, though inflation readings will continue to influence the Bank’s decisions.
Annual average and near-term outlook
On an annual average basis, consumer prices rose 2.1 per cent in 2025, down from a 2.4 per cent increase in 2024. The base-year effect from the 2024 tax holiday complicates comparisons in the short term, but the easing in CPI-median and CPI-trim indicates underlying inflationary momentum has softened.
Policymakers and markets will focus on incoming monthly data for confirmation that core measures continue to trend toward the Bank’s 2 per cent goal. For now, the December report points to a mixed picture: headline inflation ticked up for technical reasons, while underlying inflation pressures kept easing.
inflationBank of CanadaStatistics Canadacost of livinggroceries
