Skip to main content

The latest on inflation in Canada

Canada’s annual inflation rate in February unexpectedly cooled to 2.8 per cent, the slowest pace since June, despite forecasters who had widely expected an acceleration in price growth.

The latest data, released by Statistics Canada, likely boosts expectations of a mid-year rate cut.

Key points:

Find updates from our reporters and columnists below.

11 a.m.

What’s next?

This was the final inflation report before the Bank of Canada’s next rate decision on April 10, although that’s expected to be a routine affair from a rates perspective, with the policy rate not budging from its current 5 per cent.

However, the key thing to watch will be the central bank’s language around monetary policy – most notably, whether it’s actively discussing a move to lower rates.

Thus far, the central bank has tempered its threats of raising interest rates further, and Mr. Macklem has said the bank’s governing council is shifting toward a discussion of how long to maintain rates at current levels.

Put another way, investors will be eyeing whether the BoC tees up a rate cut in June. Central banks tend to telegraph their moves in advance, notwithstanding situations where they must react to a quickly changing economy.

Statistics Canada will publish the next results from its Labour Force Survey on April 5. The Canadian economy is continuing to churn out new positions, although not at the same rate as the population is increasing. As a result, the employment rate has fallen for five consecutive months.

Matt Lundy

10:35 a.m.

The not-so-great news in a good-news inflation report

There is a lot to like about Canada’s February inflation data. The overall rate surprised to the downside, falling to 2.8 per cent from 2.9 per cent in January. Grocery prices were up just 2.4 per cent compared with this time last year, the smallest annual increase since July 2021. And Canadians are paying less for new cellphone and Internet contracts.

The not-so-great news? Gasoline prices.

Canadians weren’t paying that much more at the pump last year compared to February of 2023. In year-over-year terms, gas prices were up just 0.8 per cent. But the jump from January to February of this year was more palpable: a 4-per-cent increase.

Prices are on the rise because of what’s happening in the oil market. The OPEC+ group of oil-exporting countries recently announced it would extend voluntary supply cuts into the April-to-June part of the year, a move meant to prop up crude prices.

The war in Ukraine is also playing a role, as Kiev increasingly targets Russian energy infrastructure. Ukrainian attacks have idled around 7 per cent of Russia’s refining capacity, according to a recent analysis by Reuters.

A sustained rise in gasoline prices would be a significant further squeeze on Canadians who are already struggling to keep up with high living and borrowing costs.

After all, while spending more to fill up the tank delivers immediate financial pain, grocery prices growing more slowly isn’t much in the way of relief on people’s wallets.

Erica Alini

10:15 a.m.

February inflation report bolsters argument for Bank of Canada rate cuts

Open this photo in gallery:

Bank of Canada Governor Tiff Macklem takes part in a news conference after announcing an interest rate decision in Ottawa on March 6.Blair Gable/Reuters

The Bank of Canada may be one step closer to cutting interest rates after back-to-back inflation reports showed tight monetary policy is working to cool price increases.

Governor Tiff Macklem and his team have kept the bank’s policy interest rate at 5 per cent since last summer, waiting for high borrowing costs to slow economic activity and act as a brake on inflation.

So far they’ve remained guarded about the timing of potential rate cuts. However, better-than-expected inflation data in both January and February have significantly bolstered the case for rate cuts in the coming months.

Most Bay Street analysts are betting on a first rate cut in June, although there is a slim chance that the bank could move in April.

“April still seems too early to be pulling the trigger on rate cuts, though it can’t be entirely ruled out if the Business Outlook Survey shows even more progress,” Bank of Montreal chief economist Doug Porter wrote in a note to clients.

“The softness of the domestic economy and increasing slack driven by higher rates is helping put downward pressure on inflation, just as the BoC intended. At a minimum for April, look for the Bank to open the door to rate cuts.”

At the last rate announcement in early March, Mr. Macklem said he is looking for “sustained easing” in core inflation measures, which strip out the most volatile price movements, before lowering interest rates. Here, the February data was promising. CPI Median grew at an annual rate of 3.1 per cent, down from 3.3 in January. CPI Trim fell to 3.2 per cent from 3.4 per cent.

Overall consumer price index inflation is also tracking below the Bank of Canada’s forecasts for the quarter.

Because interest rate changes affect the economy and the rate of inflation with a considerable lag, central bank officials have said they could start lowering interest rates before inflation is all the way back to the bank’s 2-per-cent target.

The bank’s latest forecast, from January, shows inflation hovering around 3 per cent until the middle of the year, before falling back to 2.5 per cent near the end of the year and 2 per cent in 2025. It will publish an updated forecast in its quarterly Monetary Policy Report on April 10.

While most speculation is on when the Bank of Canada will start cutting rates, analysts are also trying to gauge how quickly the bank will move when it does start easing monetary policy. Mr. Macklem offered a hint at a press conference earlier this month: “I think it’s very safe to say we’re not going to be lowering rates at the pace we raised them.”

Mark Rendell

10:05 a.m.

Economists react to StatsCan’s February inflation report

Here’s a snapshot of how economists are reacting:

Douglas Porter, chief economist, BMO Capital Markets

It’s difficult to poke any holes in this report. We’re not the only analysts caught by surprise at how modest these inflation rates of the past two months have been (and especially in contrast to the high-side and sticky readings in the U.S.) — the Bank of Canada had projected Q1 inflation to average 3.2 per cent in its January Monetary Policy Report, while we are now headed for 2.8 per cent. That’s a big and welcome difference, but is it sustained enough for rate cuts? April still seems too early to be pulling the trigger on rate cuts, though it can’t be entirely ruled out if the Business Outlook Survey shows even more progress. The softness of the domestic economy and increasing slack driven by higher rates is helping put downward pressure on inflation, just as the BoC intended. At a minimum for April, look for the Bank to open the door to rate cuts. BMO continues to call for a June start to rate cuts, and this report certainly reinforces our conviction.

Matthieu Arseneau/Alexandra Ducharme, economists at National Bank Financial

The biggest surprise came from clothing prices, which experienced atypical weakness recording a 2.7-per-cent decline, the second sharpest contraction in history after the 6.7-per-cent decline recorded in April, 2020, when the economy was closed at the start of the pandemic. There were, however, other weaknesses during the month - notably food, which posted its first monthly price fall since December, 2020. Household operations and alcohol/tobacco were also showing price declines. This is the first time in 18 months that we have seen half of the major components in a deflationary situation.

Today’s data reflect the cooling of the Canadian economy over the last six quarters, during which the monetary policy transmission took place. Given the economy’s lagged response to interest rates, which remain restrictive, inflationary pressures are set to ease further in the months ahead. The private sector has generated virtually no jobs since June last year, illustrating the weak appetite of corporations. ... As the Bank of Canada’s latest communications have focused on inflation resilience rather than signs of weak growth, there is a risk that it will inflict too much damage on the economy by maintaining an overly restrictive monetary policy.

Katherine Judge, economist, CIBC

There was unambiguously good news on the inflation front in Canada in February. ... This is the second month in a row in which inflation has looked softer than expected, and with ample evidence that higher interest rates are working to tame inflation, the Bank of Canada is on track to start cutting interest rates in June. The Bank of Canada will look through the volatile categories ... with other core measures providing a better signal of inflation stemming from underlying demand. On that score, virtually every core measure looked more encouraging. Services ex. shelter inflation slowed to 1.6 per cent y/y, showing that the sluggishness in consumer demand is working to tame inflation in that area, which also suggests a further slowdown in wage inflation ahead, something that the Bank is looking for in order to trim interest rates.

This report is clearly encouraging from the Bank of Canada’s perspective. It is the last inflation report that policymakers will receive before the April forecast update and announcement, and will allow policymakers room to sound more dovish at that meeting, even though they will likely want to wait to see more evidence of the labour market loosening before pulling the trigger on interest rate cuts in June.

Read more for the full roundup of economist reaction.

Darcy Keith

9:40 a.m.

Inflation highlights: Prices for groceries, clothing and rent

Open this photo in gallery:

The costs of rent have jumped 8.2 per cent over the past year, owing to strong demand and weak supply for rental units.Adrian Wyld/The Canadian Press

Here are some highlights from Tuesday’s report.

  • February marked a milestone of sorts. Grocery prices – which increased 2.4 per cent, year-over-year – rose at a slower pace than overall inflation. Statscan said this was partly owing to a base-year effect, in which today’s grocery prices were compared with a large bump a year ago. Still, the trend for groceries has been slowing for a while.
  • Over the past year, cheese prices have fallen 1.4 per cent and fresh fruit has dropped by 2.6 per cent. Meat prices have risen 2.6 per cent, while butter is up 0.6 per cent.
  • Rents are still a big financial issue. Those costs have jumped 8.2 per cent over the past year, owing to strong demand and weak supply for rental units.
  • Clothing and footwear prices have fallen by 4.4 per cent and 5.3 per cent, respectively, over the past year. The apparel industry has engaged in steep discounting of late.
  • Alberta notched the highest inflation by province at 4.2 per cent, year-over-year. (The next highest was Quebec at 3.3 per cent.) Statscan said the Alberta figures were partly owing to a sharp uptick in natural gas prices.

Matt Lundy

9:25 a.m.

Here’s a list February inflation rates for Canadian provinces

Here’s what happened in the provinces (previous month in brackets):

  • Newfoundland and Labrador: 2.0 per cent (previous month: 2.5)
  • Prince Edward Island: 1.5 per cent (previous month: 1.6)
  • Nova Scotia: 2.8 per cent (previous month: 3.0)
  • New Brunswick: 2.1 per cent (previous month: 2.3)
  • Quebec: 3.3 per cent (previous month: 3.3)
  • Ontario: 2.4 per cent (previous month: 2.7)
  • Manitoba: 0.9 per cent (previous month: 0.8)
  • Saskatchewan: 1.7 per cent (previous month: 1.9)
  • Alberta: 4.2 per cent (previous month: 3.4)
  • British Columbia: 2.6 per cent (previous month: 3.0)

– The Canadian Press

9:20 a.m.

Analysis: February’s inflation data offers two reasons to be optimistic

Open this photo in gallery:

Prices for food purchased from stores rose 2.4 per cent on a 12-month basis, down from 3.4 per cent in January, according to Statistics Canada's February consumer price index report.Cole Burston/The Canadian Press

A good news inflation report? We haven’t seen many of those in the past few years, but the February data on the cost of living offers two reasons to be optimistic about pesky inflation.

One is the fact that the overall inflation rate fell to 2.8 per cent in February on a year-over-year basis from 2.9 per cent in January and 3.4 per cent in December. We are making consistent, if slow, progress in moving toward the Bank of Canada’s preferred 2 per cent zone for inflation.

Second, grocery inflation was down to 2.4 per cent from 3.4 per cent in January. Groceries and shelter have been big inflation sore spots for a couple of years now. In fact, February was the first month since October, 2021, that grocery prices increased at a rate below the headline inflation number. Still, it’s worth noting that if restaurants are added to the picture, the broader measure of food inflation came in at 3.3 per cent last month.

Shelter costs were up 6.5 per cent in February, a reflection of increases in rent and mortgage interest costs. Rent could be the stickiest problem of all in fighting inflation. According to the most recent report from, the monthly cost of a one-bedroom apartment is up 12.6 per cent to $1,946. High house prices and population growth have driven up demand for rental units at a time when not enough new supply is coming onstream.

The inflation rate in the United States increased last month, a sign of how resilient inflation has been despite two years of high interest rates. We’ll need to see more declines in the inflation rate in Canada before interest rates start to fall, but the outlook for cheaper borrowing costs looks a bit brighter just now.

Rob Carrick

9:10 a.m.

Here’s a list of February inflation rates for selected Canadian cities

Canada’s annual inflation rate was 2.8 per cent in February, Statistics Canada says. The agency also released rates for major cities, but cautioned that figures may have fluctuated widely because they are based on small statistical samples (previous month in brackets):

  • St. John’s, N.L.: 2.5 per cent (previous month: 2.8)
  • Charlottetown-Summerside: 1.3 per cent (previous month: 1.5)
  • Halifax: 3.4 per cent (previous month: 3.5)
  • Saint John, N.B.: 2.3 per cent (previous month: 2.4)
  • Quebec City: 3.3 per cent (previous month: 3.4)
  • Montreal: 3.4 per cent (previous month: 3.5)
  • Ottawa: 1.8 per cent (previous month: 2.0)
  • Toronto: 3.0 per cent (previous month: 3.3)
  • Thunder Bay, Ont.: 2.2 per cent (previous month: 2.1)
  • Winnipeg: 1.0 per cent (previous month: 1.0)
  • Regina: 2.0 per cent (previous month: 2.4)
  • Saskatoon: 2.1 per cent (previous month: 2.3)
  • Edmonton: 4.2 per cent (previous month: 3.0)
  • Calgary: 5.1 per cent (previous month: 4.1)
  • Vancouver: 2.9 per cent (previous month: 3.3)
  • Victoria: 2.5 per cent (previous month: 2.8)
  • Whitehorse: 2.5 per cent (previous month: 2.6)
  • Yellowknife: 1.7 per cent (previous month: 2.8)
  • Iqaluit: 3.1 per cent (previous month: 3.0)

– The Canadian Press

9:02 a.m.

How markets are reacting to the latest inflation data

Open this photo in gallery:

The Canadian dollar and government of Canada bond yields immediately tumbled on the softer-than-expected inflation readings on Tuesday.JONATHAN HAYWARD/The Canadian Press

The market clearly wasn’t positioned for this report. The Canadian dollar and government of Canada bond yields immediately tumbled on the softer-than-expected inflation readings. The loonie fell about a quarter of a cent against the U.S. dollar to 73.50 US cents. The Canada two-year bond yield, which was nearly unchanged prior to the 8:30 a.m. ET report, immediately fell eight basis points.

How economists and market bets for rate cuts reacted to today’s surprisingly weak Canada inflation data

Money markets are now placing about a 60-per-cent chance that the Bank of Canada will pull the trigger on its first rate cut in June, up from less than 50 per cent prior to the data. And, based on implied probabilities in the swaps market, they are placing more than an 80-per-cent chance of looser monetary policy in place by July.

Money markets are pricing in a total of 75 basis points of cuts by the end of this year by both the Bank of Canada and the U.S. Federal Reserve. But today’s report and the credit market reaction to it suggests it might be Canada’s central bank to cut first - in June - whereas the Fed is expected to hold off until July.

Darcy Keith

8:53 a.m.

The new inflation numbers

Open this photo in gallery:

Statistics Canada released its February consumer price index report Tuesday, which shows price growth softened for a second consecutive month.Justin Tang/The Canadian Press

Canada’s inflation rate surprisingly fell last month. The Consumer Price Index rose 2.8 per cent in February on an annual basis, down from 2.9 per cent in January. Financial analysts were expecting an uptick to 3.1 per cent.

While there was a slight increase in gasoline costs last month, it was offset by lower prices for cellphone and internet plans. Grocery inflation is also easing. Prices for food purchased from stores rose 2.4 per cent on a 12-month basis, down from 3.4 per cent in January. Grocery inflation had peaked at more than 11 per cent.

The results show inflation is easing at a faster pace than anticipated by the Bank of Canada. In January, the central bank projected that inflation would average 3.2 per cent in the first quarter of the year.

The inflation rate has resided within the BoC’s target range of 1 per cent to 3 per cent for two consecutive months – the first time that’s happened since early 2021.

Perhaps most crucially, core measures of inflation – which strip out volatile movements in the CPI – showed further signs of subsiding. The Bank of Canada’s preferred measures rose at an average annual rate of 3.15 per cent in February, down from 3.35 per cent. On a three-month annualized basis, those measures rose 2.2 per cent, the slowest pace since January, 2021.

Tuesday’s report sets up a highly anticipated Bank of Canada decision on April 10, which could potentially tee up a rate cut in June.

Matt Lundy

8:30 a.m.

Canada’s inflation rate ticked down to 2.8% in February: Statscan

Canada’s annual inflation rate surprisingly ticked down to 2.8 per cent in February from 2.9 per cent in January. Financial analysts were expecting an uptick to 3.1 per cent.

Matt Lundy

7:30 a.m.

Market expectations ahead of February’s inflation report

Futures for Canada’s main stock index fell this morning as investors turned cautious after hotter-than-expected domestic producer prices data raised the risk of an upside surprise to the inflation data later in the day.

March futures on the S&P/TSX index were down 0.2 per cent at 6:34 a.m. ET.

Premarket: TSX futures retreat ahead of inflation data

All eyes will be on Canada’s consumer price index (CPI) data due at 8:30 a.m. ET, for clues on the central bank’s policy outlook. Economists expect inflation to rise to an annual rate of 3.1 per cent in February from 2.9 per cent in January.

Data on Monday showed that producer price inflation rose 0.7 per cent in February versus an expectation of a 0.1 per cent rise, led by a 2.1 per cent increase in raw material prices.

Money market participants expect the Bank of Canada to cut interest rates by 60 basis points in 2024, with the first rate cut likely in July.

– Reuters

7 a.m.

February inflation report to be released today

Open this photo in gallery:

Statistics Canada will publish its February's inflation report on Tuesday morning.Sean Kilpatrick/The Canadian Press

Inflation may deliver another head-fake this week. After the annual inflation rate fell to 2.9 per cent in January, analysts expect it perked up to 3.1 per cent in February. Statistics Canada will publish the official figures later this morning.

The January figures were something of a surprise, in that inflation fell back inside the Bank of Canada’s target range of 1 per cent to 3 per cent – only the second time that’s happened since prices began to accelerate in 2021. The numbers were unexpectedly weak, with several categories –including apparel and airfares – seeing price cuts.

Economists are predicting an uptick in inflation for several reasons. For one, gasoline prices rose last month. And some atypical price declines in January could easily reverse course in February.

The clothing, footwear and recreation categories “were surprisingly weak in January, suggesting we could see a chunky reversal,” Bank of Montreal rates and macro strategist Benjamin Reitzes said in a research note. “However, both sectors are discretionary spending, and given the consistent softness in consumption, firms might not be as able to reverse discounts or push prices higher.”

A key question will be the path of core inflation measures, which remove volatile aspects of price growth. BMO economists expect the Bank of Canada’s preferred measures of core inflation accelerated last month.

Investors have been sharply repricing their expectations for interest rates over the past couple months because of the persistence of inflation, particularly in the United States. Heading into Tuesday’s report, money markets were pricing in the first BoC rate cut in July; at the outset of 2024, the first rate cut was expected in April.

The Bank of Canada aggressively raised rates over 2022 and 2023 to curb demand in the economy and bring inflation under control. Its benchmark interest rate of 5 per cent is the highest since 2001.

The central bank expects inflation to linger around 3 per cent over the first half of 2024, ease in the second half and then return to the 2-per-cent target in 2025.

Bank of Canada officials are generally reticent to speak about lowering interest rates and have said they’re cautious of cutting them too early. However, at the bank’s most recent rate decision in early March, Governor Tiff Macklem said that rates would not be lowered as quickly as they were raised.

Matt Lundy

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe