In December, Canada’s annual inflation rate rose to 2.4 percent compared to the previous year when a temporary GST break was in effect, as reported by Statistics Canada. The tax cut, initiated in December 2024 for two months, impacted inflation rates in 2025 but phased out of year-over-year comparisons last month, leading to an acceleration in price growth. December’s rate slightly surpassed November’s 2.2 percent, partially offset by a decrease in gas prices. Excluding energy, inflation climbed to three percent in December, following a 2.6 percent uptick in November.
Core inflation measures, excluding volatile components like gas prices and tax adjustments, decreased in December, aligning closely with the Bank of Canada’s target of around 2.5 percent. Notably, travel tour prices dropped by 3.2 percent year-over-year in December, while air transportation costs dipped by 0.8 percent. Despite the usual holiday season price hikes in transportation, December witnessed a notable 34.5 percent increase from November, surpassing previous year-end patterns.
Grocery prices remained steady from November to December but surged by five percent compared to the previous year, primarily driven by the costs of coffee and fresh or frozen beef. The annual average inflation rate for 2025 stood at 2.1 percent, marking a slight decrease from 2024. Services prices rose by 3.1 percent, chiefly influenced by reduced growth in mortgage interest expenses due to the Bank of Canada’s interest rate adjustments. Conversely, goods prices increased at a higher rate in 2025, with durable goods such as passenger vehicles contributing to the uptick.
Grocery prices, particularly coffee, cocoa beans, and sweets, experienced a 3.5 percent increase in 2025 compared to a 2.2 percent rise in 2024. Weather-related impacts on growing regions affected coffee and cocoa beans prices, while U.S. tariffs on producing countries influenced refined coffee and sweets costs. 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. Restaurants saw a 2.6 percent price increase in 2025, slightly lower than the previous year’s 3.6 percent rise.
