Canada’s headline inflation rate eased to 1.8% in February 2026, down from 2.3% in January and slightly below market expectations of 1.9%. This marked the lowest reading since July of the previous year. The pace of price growth remained broadly consistent with the Bank of Canada’s baseline projection that inflation would hover near its 2% target in the near term. However, both the Bank’s outlook and the February data predate the outbreak of war in Iran, which has since driven a sharp increase in global energy prices and other selected commodities.
The February slowdown was partly driven by base effects linked to the expiration of tax breaks in February 2025, which helped push food inflation down to 5.3% from 7.3% a month earlier. Price growth also moderated in several major categories, including recreation and education (0.5% vs. 1.0% in January), household operations (1.2% vs. 2.5%), and shelter (1.5% vs. 1.7%). In addition, transportation deflation became less pronounced, with prices falling 0.8% compared with a 1.7% decline in January.
Core inflation measures tracked by the Bank of Canada also eased more than anticipated. In particular, the trimmed-mean core rate fell to 2.3%, its lowest level in four years.
