Inflation and the Consumer Price Index in Canada
Quick facts
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- The rate of inflation is based on prices change within the Consumer Price Index (CPI). This is based on a theoretical basket of goods. Statistics Canada reports on how prices for these items fluctuate on both a monthly and annual basis.
- The CPI basket is made up of 8 major components: Food; Shelter; Household operations, furnishings and equipment; Clothing and footwear; Transportation; Health and personal care; Recreation, education and reading, and Alcoholic beverages, tobacco products and recreational cannabis.
- Canada's current headline inflation rate is 2.6%
- The rate of inflation is based on prices change within the Consumer Price Index (CPI). This is based on a theoretical basket of goods. Statistics Canada reports on how prices for these items fluctuate on both a monthly and annual basis.
Frequently Asked Questions
What is the current inflation rate in Canada?
Canada’s inflation rate for February 2025 is 2.6%. This is a steep increase from 1.9% in January.
What is the highest CPI in Canadian history?
Canada’s inflation rate is reported on monthly by Statistics Canada, and fluctuates based on the pace of price growth recorded within the Consumer Price Index basket of goods. Currently, inflation in 2024 is trending lower than in the previous two years; the measure hit a 40-year high of 8.1% in June 2022.
What is the expected inflation rate for the next five years in Canada?
It’s impossible to predict how inflation may trend over the long term, as it is sensitive to economic data and developments, which are often unpredictable. As of January 2025, the latest CPI reading is at 1.8%, and may continue to be in the target range of 2-3% in the near future.
Is CPI the same as inflation?
No, CPI is not the same as inflation, but they are closely related.
- The Consumer Price Index is a measure that tracks the average change over time in the prices paid by consumers for a basket of goods and services. This basket typically includes items such as food, housing, transportation, and clothing, and it reflects spending patterns for a specific population.
- Inflation refers to the rate at which the general level of prices for goods and services rises over a period, leading to a decrease in the purchasing power of money. Inflation is typically expressed as a percentage increase from one period to another, such as month-over-month or year-over-year.
CPI is one of the primary tools used to measure inflation. By comparing the CPI at two points in time, statisticians calculate the rate of inflation. For example, if the CPI was 100 last year and is 105 this year, the inflation rate over the year is 5%.

Jamie David, Sr. Director of Marketing and Mortgages
Canadian CPI: March update
Canada Inflation Rate Statistics (CPI) |
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Data for February 2025 |
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162.40 | 0.7% ↑ | 2.6% ↑ |
Consumer Price Index (CPI) | Monthly Change | Headline Inflation (Annual Change) |
The latest Consumer Price Index (CPI) reading for February 2025 revealed that inflation grew 2.6% year-over-year, up from 1.9% in January, marking an eight-month high. The increase was largely driven by the two-month GST tax holiday coming to an end on February 15, which had temporarily lowered prices in certain categories. Excluding the tax holiday effects, the inflation rate would still have increased by 0.4%.
Key measures of core inflation, CPI Trim and CPI Median, increased to 2.9% from 2.7% in January, signalling persistent underlying price pressures. Meanwhile, mortgage interest costs rose 9% year-over-year, down from 10.2% in January, marking the 18th consecutive month of deceleration. This slowdown reflects the continued impact of the Bank of Canada’s rate cuts since June 2024, which have gradually reduced borrowing costs and contributed to shelter inflation easing to 4.2%.
Read more: February CPI shoots to 2.6% following end of tax holiday
Canada CPI release dates
Canada CPI release dates |
|
Release date | Reference period |
January 21, 2025 | December 2024 |
February 18, 2025 | January 2025 |
March 18, 2025 | February 2025 |
April 15, 2025 | March 2025 |
May 20, 2025 | April 2025 |
June 24, 2025 | May 2025 |
July 15, 2025 | June 2025 |
August 19, 2025 | July 2025 |
September 16, 2025 | August 2025 |
October 21, 2025 | September 2025 |
November 17, 2025 | October 2025 |
December 15, 2025 | November 2025 |
Source: Statistics Canada
What is inflation?
Inflation refers to how prices rise or fall for common goods and services over time, and how that affects consumers’ purchasing power. This is measured using a “basket of goods and services”, and tracking how their prices change over the course of the year. Statistics Canada updates this basket annually, tweaking the weights of various components to accurately reflect consumer behaviour. This basket of goods is then used to set the Consumer Price Index, which provides a measurement for how inflation is rising or falling. This is also referred to as the “headline” inflation rate. Meanwhile, the “core” measures of inflation provide more nuanced looks into how prices are evolving, with the extremes stripped out.
When the headline inflation rate rises, this means the prices of consumer goods and services are also increasing, while a dropping inflation rate indicates deflation is occurring, meaning prices are falling, and consumers are seeing greater purchasing power.
What is the Consumer Price Index?
- The Consumer Price Index (CPI) is an index that tracks how much the average Canadian household spends on a variety of goods and services, and how that changes over time, which is referred to as price inflation.
- The Consumer Price Index is based on a 700-item basket of goods and services, divided into eight components: Food; Shelter; Household operations, furnishings and equipment; Clothing and footwear; Transportation; Health and personal care; Recreation, education and reading, and Alcoholic beverages, tobacco products and recreational cannabis.
CPI basket by component - February 2025
Food inflation
Food inflation is one of the most closely-watched components of the CPI basket of goods, as consumers acutely feel the impact of higher food prices. Over the past three years, food costs have steadily increased, creating long-term affordability challenges for many Canadians. While January 2025 saw a brief reprieve, with food prices declining by 0.6% year-over-year, they climbed again by 1.3% in February. This rebound is largely due to the expiration of the GST tax break on food items and restaurant meals, which had temporarily lowered costs during the tax holiday.
Gas prices
Gas prices are a major contributor to the CPI basket, and also one of the most volatile; energy prices can change rapidly based on external factors such as changes in the world’s crude prices, supply and demand imbalances, and the production capacity of refineries. Due to this, energy prices can spike or lower dramatically over the course of a month, and can cause dramatic year-over-year base effects in the headline inflation number. This is why core inflation measures, such as the CPI Trim and CPI Median are helpful, as they strip out some of these extreme price swings to better reflect consumer spending trends.
Shelter inflation / mortgage interest costs
Shelter inflation is the largest contributor to the CPI basket; This reflects the high cost of housing in Canada, elevated mortgage rates, and steep rent costs. Shelter inflation in Canada is made up of:
- Mortgage Interest Costs (MIC): This reflects the price-induced changes in the amount of mortgage interest owed by homeowners. Both home price changes impact this and how they impact the homeowner’s mortgage balance, as well as the amount of outstanding principal borrowers carry on their mortgages, and the size of mortgage interest payments.Following seven consecutive Bank of Canada rate cuts in 2024 and 2025, the MIC growth has slowed down. In February, Canadians were paying 9% more on their mortgages compared to the previous year, down from the 10.2% increase seen in January.
- Home replacement costs: This refers to the amount of money it would take to rebuild or repair your home to its original condition at current market prices, not including the land it sits on.
- Rent costs: This index measures how the cost of rent is evolving at a national level. Statistics Canada also provides provincial breakdowns on rent inflation costs.
What is the Canada Core CPI?
In addition to the headline CPI numbers, there are also “core” measures of inflation, which strip out various items to provide a clearer picture of how price growth is evolving. These measures are closely monitored by the Bank of Canada when gauging inflation’s progress, and are key considerations in the central bank’s rate decision making. Core inflation measures are the following:
- CPI Trim: This excludes components of the CPI basket of goods which have price change rages within the tails of the distribution of price changes. More simply put, the CPI trim removes 20% of the weighted price variations at both the top and bottom ends of price changes over the course of the month. This removes volatility and extreme price movement from the basket, which can be based on outlier events; for example, severe weather impacting crop production, and by extension, the price of food.
- CPI Median: The CPI median tracks inflation growth that corresponds to the prices changes within the 50th percentile of the CPI basket within a given month. According to the Bank of Canada, “this measure helps filter out extreme price movements specific to certain components. This approach is similar to CPI-trim as it eliminates all the weighted monthly price variations at both the bottom and top of the distribution of price changes in any given month, except the price change for the component that is the midpoint of that distribution.”
- CPI Common: The CPI common tracks common price changes across the CPI basket’s categories. It uses a factor model (a type of statistical procedure) to determine what these common changes are, which helps remove price changes caused by factors specific to certain basket items.
Canada inflation rate history
Inflation is one of the single most important factors in any country’s economy, including Canada. Whether inflation rates are high or low influences everything from consumers’ purchasing power to Canadian mortgage rates and the overall strength of the Canadian economy.
Seeing how inflation has fluctuated over the last few years, largely in response to the impact of the COVID-19 pandemic, provides Canadians with valuable insight and helps them better understand where rates may be headed in response.
Inflation growth since the pandemic
Year | Jan. | Feb. | Mar. | Apr. | May | Jun. | Jul. | Aug. | Sep. | Oct. | Nov. | Dec. |
2025 | 1.9% | 2.6% | ||||||||||
2024 | 2.86% | 2.78% | 2.90% | 2.69% | 2.87% | 2.67% | 2.53% | 2.00% | 1.60% | 2.00% | 1.9% | 1.8% |
2023 | 5.92% | 5.25% | 4.30% | 4.41% | 3.36% | 2.81% | 3.27% | 4.00% | 3.80% | 3.12% | 3.12% | 3.40% |
2022 | 5.14% | 5.69% | 6.66% | 6.77% | 7.73% | 8.13% | 7.59% | 7.01% | 6.86% | 6.88% | 6.80% | 6.32% |
2021 | 1.02% | 1.09% | 2.20% | 3.39% | 3.60% | 3.06% | 3.72% | 4.09% | 4.38% | 4.65% | 4.72% | 4.80% |
2020 | 2.40% | 2.16% | 0.89% | -0.22% | -0.37% | 0.66% | 0.15% | 0.15% | 0.51% | 0.66% | 0.95% | 0.73% |
How inflation impacts the Bank of Canada
Inflation greatly impacts the cost of borrowing in Canada as it is a key measure considered by the Bank of Canada when it determines the level of its benchmark interest rate.
The Bank of Canada has a mandate to keep the pace of inflation at a 2% target – this is a range where price growth is stable and sustainable, without putting pressure on the economy and consumers. In order to maintain this 2% range, the Bank of Canada (BoC) will increase or decrease its benchmark Overnight Lending Rate (OLR), which Canadian lenders use to set their Prime rate and, by extension, their variable-rate borrowing products. When inflation is running too high, the central bank increases its OLR, to make it tougher to borrow and discourage spending. When the economy is at risk of being too soft, the BoC will cut its OLR to keep the flow of credit going, thereby stimulating the economy.
March 12, 2025: Bank of Canada announcement highlights
On March 12, 2025, the Bank of Canada announced a 0.25% cut to its Overnight Lending Rate, reducing the benchmark rate to 2.75%. This marks the seventh consecutive reduction since June 2024, with a cumulative decrease of 225 basis points from the previous peak of 5%.
- Canada's economy began the year on solid footing, with steady GDP growth and inflation close to the Bank’s 2% target. However, increasing unpredictability from U.S. tariff policies led the BoC to further cut its benchmark rate to support economic stability.
- Following the announcement, most Canadian banks will lower their prime lending rate to 4.95%, directly benefiting consumers with variable-rate mortgages and home equity lines of credit (HELOCs).
- While fixed mortgage rates aren’t directly affected by the BoC’s decision, bond yields — currently around 2.6% — have dropped significantly, resulting in lower fixed mortgage rates. The lowest available five-year fixed rate now stands at 3.89%.
- Borrowers using other variable-rate financial products, such as personal loans, auto loans, and lines of credit, will also experience lower interest rates. Conversely, savers will face reduced returns on high-interest savings accounts (HISAs) and Guaranteed Investment Certificates (GICs).
- The latest rate cut may slightly improve housing affordability, though persistent tariff threat continues to affect buyer confidence, resulting in slower housing market activity.