The Consumer Price Index for Canada (CPI), which rose 2.3% year-over-year in January, increased by 1.8% in February. This indicates a easing of price pressures.
This slowdown is largely due to base-year effects.
Statista Canada says that the price increase in February 2025 was the primary factor for the CPI’s lower level. This is because the GST/HST holiday had ended at the middle of the month.
Food purchased in restaurants was one of the categories that showed a noticeable effect from the base year.
CPI under pressure from energy and housing component
In February, several components of the Index exerted downwards pressure on the inflation rate.
The most significant declines were in gasoline, where prices fell 14.2% on an annual basis, and gas, with a 17.1% drop compared to the same period of 2025.
Other owned accommodation costs (-2.6%), travel tours (3.1%), and homeowners’ replacement costs (-2.1%) all contributed to the decrease.
The CPI, excluding indirect taxes, increased 1.9% on an annual basis, continuing the gradual decline that began in December 2025 when the inflation rate was 2.5%.
In February 2026 the CPI rose by 0.5% monthly, but seasonally-adjusted monthly increases were only 0.1%, which indicates a relatively modest short-term increase in prices.
What is the effect of GST/HST on inflation?
On February 15, 2025 the GST/HST exemption will end, which temporarily reduced taxes on some goods and services.
Tax changes directly impact the CPI, as it represents final prices for consumers that includes taxes.
Prices used to calculate the CPI includes the Goods and Services Tax, Harmonized Sales Tax, provincial retail sales tax (PST), and tobacco, alcohol and environment taxes, where applicable.
Tax exemptions affected approximately 10% of CPI basket, starting December 14, 2024 and lasting until February 15, 2020.
The prices of the products affected increased by mid-February, 2025 after the tax breaks ended.
The cost of groceries will remain the same
Food prices at retail outlets have also grown moderately each year.
In February, grocery prices increased by 4,1% compared to 4.8% in the previous month.
The slowdown, although widespread, was not very pronounced.
The price of fresh or frozen beef rose by 13.9% in Feburary compared to 18.8% in Janurary, which contributed significantly to this moderation.
Long-term, food prices are still much higher despite the recent decline.
The price of groceries has increased by 30% since February 20, reflecting the general increase in prices that consumers have experienced over recent years.
Fuel costs and cell phone plans
Another factor that contributed to the lower inflation rate was a slowdown in cellular service costs.
The annual price increase for wireless services was only 1.5% in February compared to 4.9% in the previous month.
The main cause of the decline was a 3.3% drop in prices from one month to the next, mainly due to lower wireless services offered by various service providers.
Gasoline prices, on the other hand, continued to drop, though at a slightly slower rate than last month.
In February, after declining 16.7% from January to the previous year, it decreased by 14.2%.
The smaller decline in the price of gasoline over the past year was due to a 3.6% increase in gas prices each month, which is linked to higher crude prices prior to the Middle East conflict, and disruptions to supply in certain oil producing countries.
The post Canada’s inflation falls to 1.8% in Feb may be updated as new information becomes available.
