Canada’s annual inflation rate slowed to 1.8 per cent in February, according to Statistics Canada data published Monday. Economists had expected the inflation rate to drop to 1.9 per cent from 2.3 per cent in January, according to CIBC Economics’ consensus estimates.
The decline was in large part due to base-year effects, with prices rising more slowly than in February 2025, when the end of a government tax holiday caused the cost of certain goods to jump significantly.
“The most notable index impacted by the base-year effect in February 2026 was food purchased from restaurants, in addition to smaller impacts from alcoholic beverages and toys,“ the agency’s report on the new data notes.
The data release comes two days ahead of the Bank of Canada’s next interest rate announcement, and follows weak jobs data released last Friday.
In a Friday note to clients, CIBC economist Katherine Judge noted that core measures of inflation, which strip out more volatile items, have been broadly stable. That should give the Bank of Canada space to “play down its concern around higher energy prices” caused by the war in Iran, Judge wrote — which in turn could push the main inflation measure toward three per cent in the months ahead.
“Tame demand should keep core services inflation muted, along with the deceleration in rents, leaving the Bank of Canada on the sidelines,” Judge said.
On a monthly basis, CPI increased 0.5 per cent in February. Seasonally adjusted, CPI rose 0.1 per cent.
This story will be updated.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.
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