Canadian Inflation (February 2026)

Canadian prices, as measured by the Consumer Price Index (CPI), rose 1.8 per cent on a year-over-year basis in February, following a 2.3 per cent increase in January. On a seasonally adjusted monthly basis, the CPI was up 0.1 per cent in February, equivalent to a 1.5 per cent increase on an annualized basis. The CPI ex-energy increased by 2.6 per cent in February, down from 3.2 per cent in the previous month. Additionally, food prices increased by 5.4 per cent year-over-year, down significantly from January (7.3 per cent). In BC, consumer prices rose 1.7 per cent year-over-year in February, down 0.3 points from January. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, each fell to 2.3 per cent year-over-year, respectively. 
 
Slower headline inflation was largely driven by base-year effects of the GST holiday which ended last February, thus driving monthly prices higher while slowing down year-over-year price growth. This placed downward pressure on several sub-components, while decelerating food prices was broad-based, with grocery prices increasing by 4.1 per cent year-over-year compared to 4.8 per cent the previous month. Further, 3-month annualized core inflation cooled further to just over 1 per cent, levels not seen since May 2020. Looking ahead, significant weaknesses in the Canadian labour market and economy, coupled with sharply declining core inflation, would ordinarily suggest a potential rate cut from the Bank of Canada on Wednesday. However, the Bank must also evaluate the potential inflationary pressure of the US-Iran conflict as oil prices continue to climb. Given their past signaling for a neutral 2026 concerning policy changes, we still expect the Bank to hold on Wednesday as they assess the length and depth of the supply shock from swiftly rising oil prices.