Canada Inflation Cools to 1.8% in February 2026

Canada's annual inflation rate cooled to 1.8 percent in February 2026, marking a decline from 2.3 percent the previous month, as the lingering effects of a federal tax holiday faded from year-over-year comparisons. Statistics Canada reported the figure on March 16, slightly below economists' expectations of 1.9 percent. The data, however, predates the escalation of conflict in the Middle East, which has since driven up energy prices and prompted warnings of a potential rebound in inflation to around 3 percent or higher in the coming months.

The slowdown stemmed primarily from the end of the Goods and Services Tax-Harmonized Sales Tax break, a two-month policy from December 2024 to mid-February 2025 that temporarily removed sales taxes on household staples, dining out, gifts and other items. This created a base effect in calculations: lower prices applied throughout January 2025 but only partially in February, making the 2026 comparisons appear more favorable. Restaurant food prices, which benefited most from the holiday, saw annual inflation ease to 7.8 percent from 12.3 percent. Smaller relief appeared in alcoholic beverages and toys. Overall, the consumer price index rose 0.5...