Canada Inflation Rebounce to 2.4%: Key Insights from December CPI Data

Canada’s inflation trajectory saw a notable reversal at the end of 2025. According to the latest data from Statistics Canada, the national Consumer Price Index (CPI) rose 2.4% year-over-year in December, up from 2.2% in November. This figure exceeded economist expectations of a “hold” and marks a strategic uptick after months of steady decline.

The “Base Effect” of Tax Relief Expiry

A primary driver of this rebound was the expiration of the federal government’s temporary GST relief policy from late 2024. In mid-December 2024, the government implemented a two-month GST holiday on items such as restaurant meals, alcoholic beverages, toys, and snacks. This policy artificially lowered prices a year ago; now, as those “low-base” effects drop out of the year-over-year comparison, they have statistically pushed the inflation reading higher.

Dining Out: The Largest Inflation Driver

Restaurant meal prices surged 8.5% year-over-year, becoming one of the most significant contributors to December’s acceleration. Statistics Canada noted that the return to standard pricing following the tax holiday, combined with rising operational costs, has reinvigorated service-sector inflation. Other previously tax-exempt items, such as snack foods and candy, also saw price increases in December.

Grocery Inflation Accelerates: Beef and Coffee Lead the Way

The cost of food continues to put pressure on Canadian households:

• Grocery store prices rose 5% year-over-year.

• Coffee prices skyrocketed by over 30%.

• Fresh or frozen beef saw a 16.8% increase. While month-over-month food prices remained relatively flat, the year-over-year acceleration (up from 4.7% in November) suggests that the cost of living remains a primary concern for families across the country.

Oil Prices Provide a Buffer Amid Travel Volatility

Lower energy costs provided a much-needed offset to rising prices elsewhere. Gasoline prices fell 13.8% year-over-year, driven by ample global crude oil supplies. However, transportation costs remained volatile; while airfare saw a slight year-over-year dip, monthly ticket prices surged by 34.5%, reflecting peak holiday travel demand and rising costs for US-bound tour packages.

A Crucial Signal for the Bank of Canada

This December CPI report is the final piece of data the Bank of Canada will review before its first interest rate announcement of 2026 next week. In December 2025, the central bank held its benchmark rate at 2.25%.

Market analysts are now closely watching whether this rebound in inflation—driven by tax adjustments and structural increases in food and services—will alter the Bank’s path toward future rate cuts. While this rebound is not necessarily a sign of a broad overheating economy, it ensures that the cost-of-living crisis remains at the forefront of policy discussions.