Canada Inflation Softens Slightly in January, Keeping Policy Outlook in Focus

Canada’s inflation rate eased marginally in January, offering fresh evidence that price pressures continue to cool, although core inflation remains elevated, data released Tuesday showed.

The consumer price index (CPI) rose 2.3% year on year in January, coming in just below market expectations and down from a 2.4% increase recorded in December. On a month-on-month basis, consumer prices were unchanged, pointing to a pause in short-term inflation momentum.

However, underlying price pressures proved more persistent. The Bank of Canada’s preferred core inflation measure—which excludes volatile components such as food and energy—rose 2.6% from a year earlier and increased 0.2% compared with the previous month.

The data suggest that while headline inflation is gradually moving closer to the Bank of Canada’s target, sticky core inflation could complicate the timing and pace of future interest rate cuts, keeping policymakers cautious in the near term.