Canada's inflation rate fell to 1.8% in February but experts warn it's about to rise again

Statistics Canada says the annual rate of inflation dipped below two per cent in February as the end of last year’s federal “tax holiday” helped take some steam out of the yearly price comparisons.

The agency said Monday that February’s inflation reading came in at 1.8 per cent year-over-year, half a percentage point lower than January’s figures and just under economists’ expectations for the month.

The main factor driving the headline number lower was the end of last year’s tax holiday, which saw the federal sales tax taken off a variety of household staples, gifts and dining out for a two-month period ending mid-February 2025.

Lower prices from the tax break were only in effect for half of February last year compared with all of January, making the annual inflation calculations somewhat better last month.

Restaurant meals benefited most as the tax relief started to fall out of the inflation calculations. Annual inflation in the category cooled to 7.8 per cent in February from 12.3 per cent in January.

Toys, games and hobby supplies also saw some inflation relief in the waning days of the tax holiday, StatCan said.

Some grocery staples were also included in the temporary tax break, but StatCan said there was otherwise modest but “broad-based” inflation relief at the grocery store in February.

Inflation on food purchased from stores cooled to 4.1 per cent in February from 4.8 per cent the month previous. Fresh and frozen beef – long a pain point at the grocery store – saw its annual price hike cool to 13.9 per cent last month, nearly five percentage points lower than in January.

A month-over-month decline in the prices of cellular services also helped drive the annual inflation rate lower in February.

StatCan said the cost of gasoline, meanwhile, started to creep higher at the end of the month in the lead up to the war in the Middle East, which has pushed prices at the pump sharply higher in recent weeks.

Many economists expect those pressures will fuel higher headline inflation figures in the months to come.

The Bank of Canada will be carefully analyzing the latest price figures as the central bank is set for an interest rate decision on Wednesday.

This report by The Canadian Press was first published March 16, 2026.