By Robb M. Stewart
OTTAWA--Inflation in Canada cooled to a nine-month low in February and core price pressures continued to ease, leaving central bank policymakers under no pressure to act this week as they watch for the fallout from the recent spike in oil prices.
The consumer-price index rose at a 1.8% pace from a year earlier in February, Statistics Canada said Monday.
That marks the first time since August the pace of inflation has been below the Bank of Canada's 2% target, though it has been inside the 1%-to-3% window the central bank has been aiming at for the last two years.
Economists had been expecting inflation to slow to 1.9% from January's 2.3% due to comparisons with February last year, when the federal government's temporary sales-tax holiday ended and prices for restaurant meals, alcoholic drinks and toys climbed.
Stripping out the effect of indirect taxes, inflation has cooled each month this year and slowed to 1.9% annually in February.
The inflation reading is the final big economic indicator to be released before Wednesday's interest rate call by the Bank of Canada's governing council, but is more backward looking than usual given that energy costs have jumped as the conflict in the Middle East has escalated. Economists widely anticipate policymakers will hold rates steady and opt to monitor how the economy and inflation respond to the war in Iran.
Core prices excluding volatile food and energy costs rose 2% from a year earlier, softening from January's 2.4% growth. And the trimmed mean and weighted median measures of underlying inflation preferred by the Bank of Canada averaged 2.3% annually, compared with 2.5% at the start of the year, which is tracking below the 2.5% the central bank has projected for the first quarter.
The end of the tax break in mid-February 2025 meant downward pressure on affected items, most notably restaurant food bills, though prices still were up 7.8% even with the deceleration.
Prices for food bought at stores also remained elevated, but the year-over-year increase slowed, rising 4.1% for the latest month after a 4.8% increase in January. Grocery prices have risen a little over 30% since February 2021.
Canadians also saw a smaller decline in prices at the pump, with gasoline costs falling 14.2% in February after a 16.7% drop the month before, as crude oil prices rose with supply disruptions in some producer countries and in the lead-up to the conflict in Iran.
Cellular services were up 1.5% annually in February, slower than the 4.9% rise seen in January.
Write to Robb M. Stewart at robb.stewart@wsj.com
Corrections & Amplifications
This article was corrected at 9:01 a.m. ET because it incorrectly said the month was January. The consumer-price index rose at a 1.8% pace from a year earlier in February.
This article was corrected again at 5:06 p.m ET to reflect that Canadian grocery prices have risen a little over 30% since February 2021. The original version incorrectly said prices have risen a little over 30% since February.
(END) Dow Jones Newswires
03-16-26 0855ET
