Lowest reading since Sept 1.6%Prior was +2.3%CPM m/m +0.5% vs +0.7% expectedPrior CPI m/m 0.0%
Core measures:
BOC core 2.3% vs 2.6% priorBOC core m/m +0.4% vs +0.2% priorCore CPI % m/m % vs +0.1% priorCPI median +2.3% vs +2.4% expected (prior was 2.5%)CPI trim +2.3% vs 2.4% expected (prior was 2.4%)CPI common 2.4% vs 2.7% priorGasoline prices -14.2% vs -16.7% y/y priorGasoline prices +3.6% m/m vs -13.8% m/m priorShelter +1.5% vs +1.7% y/y prior
Canadian headline CPI inflation has decelerated markedly in early 2026, falling to 1.8% year-over-year in February from 2.3% in January and 2.4% in December 2025. Much of the recent volatility reflects base-year distortions tied to the federal government’s temporary GST/HST tax holiday, which ran from December 14, 2024 to February 15, 2025, covering roughly 10% of the CPI basket. In January 2026, the comparison to tax-free prices a year earlier artificially inflated year-over-year readings in categories like restaurant meals (+12.3%), alcohol, and toys. By February, those distortions began to unwind as the end of the tax break in mid-February 2025 pushed up the base-month price level, pulling headline inflation sharply lower. Restaurant meal inflation, for instance, fell from 12.3% to 7.8%. March 2026 will be the final month affected by GST/HST base-year effects.
Beyond the tax noise, underlying trends point to broad disinflation. Shelter inflation slipped to 1.5%, with rent growth and mortgage interest costs continuing to ease. Energy prices remained a significant drag, with gasoline down 14.2% year-over-year, partly reflecting the April 2025 removal of the consumer carbon tax. All three Bank of Canada core measures — trim, median, and common — fell to 2.3–2.4%, their lowest readings in years, reinforcing expectations that inflation is converging sustainably toward the 2% target.
This report is a bit of good news for the Bank of Canada as it looks to be winning the war on inflation, though with significant caveats. The bad news is that energy prices have dramatically spiked since the start of March and that will tie their hands going forward.
This article was written by Adam Button at investinglive.com.