Canada’s yearly inflation rate rose to 2.4 percent in December compared to the same month the previous year, as reported by Statistics Canada on Monday. This increase was influenced by the conclusion of a temporary GST break initiated by the government on December 14, 2024, which lasted for two months. The impact of this tax cut on inflation data dissipated by the end of 2025, leading to an acceleration in price growth.
In December, the inflation rate slightly surpassed November’s rate of 2.2 percent, with a decline in gas prices partially offsetting the increase. Excluding energy costs, inflation climbed to three percent in December, up from a 2.6 percent rise in November. The Bank of Canada closely monitors core inflation indicators, which eliminate volatile components like gas prices or tax-related adjustments. In December, two of these core measures experienced a decrease.
Travel tour prices dropped by 3.2 percent in December compared to the previous year, while air transportation costs decreased by 0.8 percent. Despite the usual trend of rising transportation prices during the holiday season, the rate surged by 34.5 percent in December compared to November, exceeding previous year-end increments.
Grocery prices remained stable between November and December but showed a five percent increase compared to the previous year, driven by higher prices for coffee and fresh or frozen beef. Overall, though the headline inflation rate was higher than anticipated, core inflation measures showed a moderate pullback, indicating a positive outlook for the Bank of Canada.
The annual review of consumer prices for 2025 released by Statistics Canada alongside the December inflation report revealed a 2.1 percent increase in inflation on an annual average basis. This marks a slight decline from the 2.4 percent rise in 2024, representing the smallest annual average increment since 2020. Excluding energy costs, prices increased by 2.6 percent in 2025, mirroring the rate from the previous year.
Service prices grew by 3.1 percent in 2025, a decrease from the 4.1 percent growth seen in 2024, mainly due to slower growth in mortgage interest expenses following key interest rate cuts by the Bank of Canada. Conversely, the rate of price growth for goods was higher in 2025 compared to the previous year, with durable goods, particularly passenger vehicles, driving the increase.
Grocery prices escalated by 3.5 percent in 2025, up from 2.2 percent in 2024, primarily attributed to higher prices for coffee, cocoa beans, and sweets. Weather-related disruptions in growing regions affected coffee and cocoa beans, while U.S. tariffs on producing countries impacted refined coffee and sweet prices.
Meat prices surged by 5.8 percent, with fresh and frozen beef prices soaring by 13.5 percent due to dwindling North American cattle inventories. Additionally, fresh fruit prices, particularly oranges, increased. Dining out costs rose by 2.6 percent in 2025, slightly lower than the 3.6 percent increase in 2024.