The Canadian inflation rate slowed to below 2% in February, with the decline largely tied to last year’s temporary tax break.
Statistics Canada reported Monday the Consumer Price Index (CPI) rose 1.8% on a year-over-year basis in February, following a 2.3% increase in January – just below economists’ expectations.
The deceleration was mainly the result of price increases recorded in February 2025, when the federal tax holiday ended partway through the month and consumers once again paid GST or HST on a range of goods. As those unusually large month-to-month increases dropped out of the 12-month comparison, they pulled down the February 2026 inflation rate, StatsCan said. March 2026 will be the final month affected by a base-year effect due to the GST/HST break.
Excluding the effect of indirect taxes, consumer prices still rose 1.9% in February from a year earlier.
Food prices remained a key pressure point for households. Grocery prices were up 4.1% from a year earlier in February, slowing from a 4.8% annual increase in January. The moderation was led in part by beef, with prices for fresh or frozen beef rising 13.9% compared with an 18.8% increase the month before. Even so, grocery prices are still 30.1% higher than they were in February 2021.
Restaurant food prices were also heavily influenced by the tax-holiday comparison. Prices for food purchased from restaurants still climbed 7.8% on an annual basis, but the year-over-year increase was tempered because last February’s end to the GST/HST break created a higher comparison point.
Gasoline prices continued to exert downward pressure on the annual inflation rate, falling 14.2% from a year earlier, although that decline was smaller than January’s 16.7% drop. On a monthly basis, gasoline prices rose 3.6% in February, reflecting firmer crude oil prices ahead of the Middle East conflict and supply disruptions in some producing countries.
The full impact of the Iran war on gasoline prices is expected to show up more clearly in next month’s inflation report, since February’s data captured only the earlier run-up in oil prices rather than the broader fallout from the conflict.
The Bank of Canada will announce its next interest rate decision on Wednesday. The Bank’s key overnight lending rate has been held steady since October 2025 when it was trimmed to 2.25%.
