Canada's inflation shoots up to 2.6% as sales tax break ends

Promit Mukherjee

Tue, Mar 18, 2025, 5:34 AM 2 min read

By Promit Mukherjee

OTTAWA (Reuters) - Canada's yearly ostentation complaint showed a astonishment leap to 2.6% successful February, surpassing expectations arsenic a income taxation interruption that ended successful the mediate of past period pushed prices higher amid an already broad-based increase, information showed connected Tuesday.

This is the archetypal clip successful 7 months that the complaint of summation of user prices has crossed the 2% mark, the mid-point of the Bank of Canada's people scope of 1% to 3%. In January, ostentation was astatine 1.9%.

Without the taxation break, ostentation successful February would person been 3%, Statistics Canada said.

The ostentation fig expanded currency marketplace bets for a intermission successful the interest-rate-cutting rhythm adjacent period to implicit 70% from 59% earlier the numbers were released.

The Canadian dollar firmed aft the information and was trading up 0.06% astatine 1.4283 to the U.S. dollar, oregon 70.01 U.S. cents. Yields connected the two-year authorities enslaved surged by 5.7 ground points to 2.596%.

On a month-on-month basis, prices roseate by 1.1% successful February from 0.1% the anterior month, Statscan said.

Analysts polled by Reuters had forecast the yearly ostentation astatine 2.2% and 0.6% connected a monthly ground successful February. The BoC had said past week that it expected ostentation to scope 2.5% successful March amid terms pressures owed to tariff-related uncertainty.

While prices accrued crossed astir the full CPI basket, the large leap was successful nutrient purchased astatine restaurants, immoderate covering items and intoxicant aft the taxation reprieve was lifted.

"Restaurant nutrient prices contributed the astir to the acceleration successful the all-items CPI successful February," Statscan said.

Food prices accrued 1.3% twelvemonth implicit twelvemonth portion covering and footwear accrued by 1.4% connected a yearly basis. Other items that added to terms pressures successful the CPI handbasket were transportation, which jumped by 3%, and structure costs, which were up 4.2%.

Economists person said that the income taxation interruption had distorted wide ostentation numbers, and that halfway ostentation was a much close gauge of user terms trends.

The BoC has 2 preferred measures of halfway inflation: CPI-median and CPI-trim.

CPI-median, oregon the centermost constituent of the CPI handbasket erstwhile arranged successful an bid of expanding prices, roseate to 2.9% successful February. CPI-trim, which excludes the astir utmost terms changes, was besides up to 2.9%. Both were astatine 2.7% successful January.

(Reporting by Promit Mukherjee; Editing by Dale Smith and Mark Porter)