Canada’s Inflation Rebounds to 2.4% in December After Tax Holiday Effect Fades

Food prices were expected to rise on a year-over-year basis because December 2024 restaurant prices had been lowered by the temporary GST holiday that ended in early 2025. 

Canada’s annual inflation rate accelerated to 2.4% in December, coming in hotter than economists expected and marking a noticeable uptick from November’s 2.2%. The increase was driven largely by a “base‑year effect” tied to last year’s temporary federal GST/HST holiday, which had artificially lowered prices during the same period a year earlier.

With those discounts no longer part of the comparison, categories such as restaurant meals, alcohol, and children’s goods appeared more expensive on a year‑over‑year basis, pushing the headline inflation figure higher.

Despite the jump, underlying price pressures continued to ease. Key core inflation measures — which strip out volatile items — cooled for the third straight month, suggesting that broader inflation momentum is still slowing. Month‑to‑month, consumer prices actually fell by 0.2%, reflecting softer demand in areas like transportation and shelter.

Economists note that inflation remains close to the Bank of Canada’s 2% target, and the central bank is unlikely to adjust its policy path based on a single month’s data. Many analysts still expect inflation to dip below target later this year as the economy continues to cool.