FX.co ★ Canada Inflation Rate Unexpectedly Rises

In December 2025, Canada's headline inflation rate climbed to 2.4%, up from 2.2% in November, marking the highest level in three months and surpassing market predictions of stability. This increase diverged slightly from the Bank of Canada's forecast, which anticipated the Consumer Price Index (CPI) inflation to hover around the 2% mark in the short term. The rise can be attributed to base effects stemming from the temporary GST and HST reductions introduced in December 2024, leading to increased inflation rates for specific categories: restaurant food (up to 8.5% from 3.3% in November), alcoholic beverages purchased in stores (rising to 5.6% from 3%), and toys, games, and hobby supplies (up to 7.5% from a decrease of 0.5%). In contrast, inflation declined for shelter (from 2.3% to 2.1%), and transportation costs decreased (from a rise of 0.7% to a drop of 0.5%). Consequently, the median core inflation rate, a crucial indicator for the Bank of Canada to assess underlying price trends, slowed to a one-year low of 2.5%.