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Inflation and the Consumer Price Index in Canada

Quick facts

  • 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 2.0%.

Frequently Asked Questions

What is the current inflation rate in Canada?


What is the highest CPI in Canadian history?


What is the expected inflation rate for the next five years in Canada?


Is CPI the same as inflation?


Canadian CPI: November update

Canada Inflation Rate Statistics (CPI) 

Data for October 2024

161.80 0.4% ↑ 2.0% ↑
Consumer Price Index (CPI) Monthly Change Headline Inflation (Annual Change)

The latest Consumer Price Index (CPI) reading for October 2024 revealed that inflation increased to 2.0%, up from 1.6% in September. This modest rebound remains in line with the Bank of Canada’s 2% target. Gas prices, a key driver, fell by -4.0% year-over-year, a much smaller decline compared to September’s -10.7%.

Key measures of core inflation also edged higher but remained within manageable ranges. CPI trim rose slightly to 2.6%, while CPI median held at 2.5%, indicating underlying price pressures. Mortgage interest costs, the largest single contributor to the CPI, continued to ease. Growth slowed to 14.7% in October, down from 16.7% in September, reflecting the impact of four rate cuts since June. 

Also read: Canadian inflation increases to 2% in October, but won’t derail rate cuts

Canada CPI release dates

Canada CPI release dates

Release date Reference period
November 19, 2024 October 2024
October 15, 2024 September 2024
September 17, 2024 August 2024
October 15, 2024 September 2024
November 19, 2024 October 2024
December 17, 2024 November 2024
January 21, 2025 December 2024
February 18, 2025 January 2025
March 18, 2025 February 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 - October 2024

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, grocery costs have surged by 20.7%, adding significant pressure on household budgets. Food prices rose by 2.7% year-over-year in October, marking the third consecutive month that food inflation has outpaced the headline number. While the pace of food inflation has since moderated in Canada, the overall price of food remains elevated compared to pre-pandemic years.

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. This is impacted by both home price changes 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. With four consecutive rate cuts in 2024, the MIC growth has started to slow. In October, Canadians were paying 14.7% more on their mortgages compared to the previous year, down from the 16.7% increase seen in September.
  • 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.
2024 2.86% 2.78% 2.90% 2.69% 2.87% 2.67% 2.53% 2.00% 1.60% 2.00%    
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.

December 11, 2024: Bank of Canada announcement highlights

On December 11, 2024, the Bank of Canada (BoC) reduced its Overnight Lending Rate by 0.50%, bringing it to 3.25%. This marks the fifth consecutive rate cut since June 2024, with a total reduction of 175 basis points.

  • Weak economic growth, such as Canada’s GDP growing by only 1% in the third quarter of 2024, prompted the BoC to lower borrowing costs to stimulate economic activity.
  • The prime rate has dropped to 5.45%, reducing interest rates for people with variable-rate mortgages and home equity lines of credit (HELOC). For adjustable-rate mortgage holders, payments will decrease, while those with fixed-payment variable mortgages will see more of their payments go toward the principal.
  • While fixed mortgage rates are not directly impacted by the BoC’s rate cut, five-year bond yields have already dropped to 2.8%. This could lead to further reductions in fixed mortgage rates.
  • Borrowers renewing their mortgage in 2025 will benefit from lower renewal rates, thanks to the BoC’s series of rate cuts. Given that more cuts are expected in 2025, borrowers may want to get a rate hold now to get the lowest rate available for up to 120 days. 
  • The BoC has indicated that future rate cuts may be slower and more gradual in 2025, given that the policy rate is significantly lower than where it started in June 2024. 

WATCH: December 11, 2024 Bank of Canada announcement

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