Canada’s inflation in January likely saw little change. Here’s why

Canada's annual inflation rate ticked down to 1.8 per cent in December, in large part because of the federal government's pause on sales tax for various items.

Economists expect little movement in Canada’s inflation numbers, if any, when January data is released this week, though the underlying change in prices will be clouded by a full month of the government’s GST break.

Statistics Canada’s consumer price index for the first month of 2025 is set to be released on Tuesday.

Canada’s annual inflation rate ticked down to 1.8 per cent in December, in large part because of the federal government’s pause on sales tax for an array of goods heading into the Christmas holidays. Restaurant food purchases and alcohol bought from stores contributed the most to the deceleration — both received the GST reprieve when it began on Dec. 14.

Without the tax break, however, Statistics Canada estimated inflation would have instead risen to 2.2 per cent from 1.9 per cent.

“The broader story is inflation is — even when you take out that special (tax break) factor — is close to two per cent. Maybe a little bit above,” said BMO chief economist Doug Porter, who is expecting the inflation rate to hold steady.

“We’re in a much better place than we were a year ago, let alone two or three years ago, when inflation was running hot.”

RBC assistant chief economist Nathan Janzen expects inflation to tick down again to 1.7 per cent, also because of the temporary tax break.

“The tax holiday will continue to muddy inflation readings until March when we can get a cleaner read of the consumer price index that are clear of distortions,” Janzen wrote in a note to clients.