As widely expected, Canada’s inflation rate rose at a faster pace in February than January. Inflation has hovered around the Bank of Canada’s (BoC) 2% target in recent months, but the end of the sales tax holiday brought with it upward pressure on prices. The highest inflation rate since last June adds to concern about the overall economy, which is expected to be weakened by the extensive tariffs from the US. Here’s a deeper look at Canada’s inflation rate in February.

• Canada’s annual inflation rate was 2.6% in February, up from the 1.9% rate in January. A Bloomberg survey showed economists were expecting an inflation rate of 2.2%. This marked the highest rate of annual inflation in Canada in eight months.
• On a monthly basis, consumer prices rose by 1.1% in February. This marked the fastest pace of monthly growth since May 2022.
• The sales tax holiday on selected products ended in February, adding to the upward pressure on consumer prices. Food prices increased year-over-year in February, rebounding from a drop in January. The price growth for clothing and recreation also accelerated in February.
• Core inflationary pressures also increased in February. Two core measures of inflation tracked by the BoC were just below 3% in February.
• The BoC expected inflation to accelerate with the sales tax holiday coming to an end. Still, the BoC will have to grapple with higher inflation and the impact of tariffs on the Canadian economy ahead of its next interest-rate decision.

Canadians are facing plenty of economic uncertainty. Inflation is picking up, while tariffs are expected to hinder economic activity. This has also impacted Canadian financial markets, which have seen some volatility over the year. The BoC will need to carefully consider this economic environment as it makes its next interest-rate decision on April 16.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.