| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 0.6% | 0.1% to 0.7% | 0.5% | 0.0% |
| CPI - Y/Y | 1.9% | 1.7% to 2.1% | 1.8% | 2.3% |
| Core CPI - M/M | 0.5% | -0.2% | ||
| Core CPI - Y/Y | 2.0% | 2.4% |
Highlights
The 12-month inflation rate came down to 1.8 percent in February from 2.3 in January, the lowest rate since December 2024, slightly lower than the 1.9 percent consensus expectation in an Econoday survey of forecasters. Excluding the effect of indirect taxes, the slowdown was more muted, to 1.9 percent from 2.1 percent, but still confirming the easing trend for the third consecutive month.
A temporary GST/HST tax break during the 2025 winter ended February 15, 2025, which put down downward pressure on the 12-month CPI in february 2026, particularly impacting prices for food purchased from restaurants. The latter were nonetheless the largest year-over-year upward contributor.
March will be the last month affected by the GST/HST tax holiday.
Excluding food and energy, prices increased 0.5 percent on the month, the same as the all-item CPI, and 2.0 percent year-over-year. Food prices were flat on the month and up 5.4 percent from a year earlier, and energy was up 2.3 percent from January but down 9.3 percent year-over-year.
The slowing 12-month inflation rate comes on the back of an abysmal jobs report that showed the Canadian economy shed nearly 84,000 jobs in February, led by a 108,400 plunge in full-time positions driven by the private sector. The unemployment rate is now at 6.7 percent.
This puts the Bank of Canada in a situation where arguing against a rate cut has become more difficult. Although the February inflation slowdown was expected by the central bank, which had actually projected 1.8 percent in February and 1.7 percent in March, the inflation rate is anticipated to return toward its 2.0 percent target in April.
Each of the three central bank's own core measures of inflation was down in February. While still above the 2 percent target, the average of CPI-common, CPI-trim and CPI-median has been coming down since December: 2.3 percent in February, 2.5 percent in January, 2.7 percent in December and 2.8 percent in November.
Services prices increased 0.6 percent on the month and 2.7 percent year-over-year, and good prices were up 0.5 percent both from the previous month and the previous year.
The main upward contributors to the 12-month CPI rate in February were food purchased from restaurants (7.8 percent), rent (3.9 percent), and passenger vehicle insurance premiums (8.2 percent). Gasoline and natural gas were the largest downward contributors, with declines of 14.2 percent and 17.1 percent, respectively.
The largest monthly upward contributors were travel tours and gasoline, while telephone services were the largest downward contributor.
Looking at the main categories, all prices increased year-over-year, except for transportation, which was down 0.8 percent. Food recorded the largest gain. On a monthly basis, housing-related prices declined: shelter contracted 0.1 percent and household operations, furnishings and equipment was down 0.3 percent.
Seasonally adjusted prices edged up 0.1 percent on the month, the same as in January. Excluding food and energy, the CPI rose 0.2 percent, up from 0.1 percent in January.
Market Consensus Before Announcement
CPI expected up 0.6 percent on month (NSA) in February and 1.9 percent on year after no change on month and rising 2.3 percent on year in January.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.