Canada's annual inflation rate accelerated in December, moving higher than economists had anticipated, according to the latest data from Statistics Canada.
Key Driver: The End of the GST Holiday
The federal agency reported that the consumer price index (CPI) rose 2.4 per cent in December compared to the same month a year earlier. This marked an increase from the 2.2 per cent rate recorded in November. A primary factor behind this gain was a statistical effect from the GST/HST holiday that was in place during part of December 2024.
"The gain was largely due to lower comparable prices during the GST/HST holiday a year earlier," Statistics Canada stated in its release on Monday, January 19, 2026. This created a higher year-over-year comparison once the temporary tax relief period ended.
Restaurant Prices Lead the Increase
Beyond the base effect from the tax holiday, a significant contributor to the rise in the all-items CPI was the cost of dining out. Prices for food purchased from restaurants surged by 8.5 per cent year-over-year, making this category the largest single driver of the December inflation reading.
The December figure came in above the expectations of many financial analysts, who had broadly forecast that the inflation rate would hold steady at November's 2.2 per cent level.
Context and Economic Implications
The latest data provides a crucial snapshot of price pressures in the Canadian economy as the year concluded. While the increase is notable, analysts will be watching closely to see if this is the start of a new upward trend or a temporary blip influenced by one-off factors like the expired tax measure.
The report underscores the ongoing impact of service-sector inflation, particularly in areas like restaurants, even as goods inflation has shown more moderation in recent months.
