Canada inflation slows to 1.8% in February

After rising 2.3% in January, Canada’s Consumer Price Index (CPI) increased 1.8% year over year in February, pointing to easing price pressures.

The slowdown in annual inflation largely reflects base-year effects.

According to Statistics Canada, the main factor behind the lower headline CPI was price increases recorded in February 2025, when the GST/HST tax holiday ended midway through the month.

The base-year effect was visible across several categories, particularly food purchased from restaurants.

Energy and housing components put downward pressure on CPI

Several components of the index exerted downward pressure on the annual inflation figure in February.

Among the most notable were gasoline prices, which declined by 14.2% year on year, and natural gas, which fell by 17.1% compared with the same month in 2025.

Additional downward contributions came from homeowners’ replacement cost (-2.1%), other owned accommodation expenses (-2.6%), and travel tours (-3.1%).

Excluding the effect of indirect taxes, the CPI increased by 1.9% year on year, continuing a gradual slowdown that has occurred each month since December 2025, when inflation measured 2.5%.

The CPI increased by 0.5% on a monthly basis, while the seasonally adjusted monthly increase was 0.1% in February 2026, indicating relatively mild short-term price growth.

The effect of the GST/HST break on inflation

The annual slowdown in inflation was closely linked to the end of the GST/HST tax break on February 15, 2025, which had temporarily lowered taxes on certain goods and services.

Changes in taxes directly affect the CPI because it reflects final consumer prices that include taxes.

The prices used in the CPI include the Goods and Services Tax (GST), Harmonized Sales Tax (HST), provincial retail sales taxes (PST), and, where applicable, tobacco, alcohol, and environmental taxes.

Approximately 10% of the CPI basket was affected by the tax exemption, which began on December 14, 2024, and lasted until February 15, 2025.

Prices for the affected products increased in mid-February 2025 when the tax break ended.

Grocery inflation remains

The annual growth in food prices purchased from retailers was also moderate.

Grocery prices rose by 4.1% in February compared with 4.8% in January.

Although the slowdown was broad-based, it was not particularly pronounced.

Prices for fresh or frozen beef increased by 13.9% in February compared with 18.8% in January, contributing significantly to the moderation.

Despite the recent slowdown, long-term food prices remain much higher.

Grocery prices have increased by 30.1% since February 2021, reflecting the overall rise experienced by consumers in recent years.

Cellular plans and petrol costs

A slowdown in the cost of cellular services was another factor contributing to lower annual inflation.

In February, the annual increase in wireless service prices was 1.5%, compared with 4.9% in January.

A 3.3% month-over-month decline, driven by lower prices offered by several wireless service providers, was the main reason for the slowdown.

In contrast, gasoline prices continued to fall, although at a slower pace than in the previous month.

After declining by 16.7% in January, the annual decrease narrowed to 14.2% in February.

A 3.6% monthly increase in gasoline prices, linked to higher crude oil prices before the Middle East conflict and supply disruptions in some oil-producing countries, contributed to the smaller year-over-year decline.