Canada’s inflation rate held firm at 2.2 per cent in November, even as grocery prices recorded their sharpest increase in almost two years, according to new data from Statistics Canada.
The result came in slightly below expectations. Economists surveyed by CIBC Economics had forecast inflation would tick up to 2.3 per cent from October.
Instead, the Consumer Price Index (CPI) showed price pressures broadly unchanged, reinforcing expectations that the Bank of Canada (BoC) will remain on hold in the months ahead.
Most economists interpreted the November data as consistent with the central bank’s recent messaging, which has emphasized patience after a series of rate decisions aimed at keeping inflation close to its two-per-cent target.
Small changes make a big difference
However, rising food prices remain a concern — not because they are driving overall inflation, but because of how they influence public perception.
The agency pointed out that in November, prices for fresh or frozen beef (+17.7 per cent) and coffee (+27.8 per cent) continued to drive overall grocery inflation on an annual basis.
“While the Bank’s policies can do precious little. The reality is that rising food prices can make a big impact on inflation expectations,” BMO chief economist Douglas Porter wrote in a note to clients.
He added that inflation expectations are something the BoC “cares about a great deal.”
“Overall, though, the calming core metrics would fit with the view that the BoC will be comfortable on the sidelines for some time yet,” Porter said.
Grocery costs jump sharply
Food prices were a notable outlier in November’s data. Grocery prices rose 4.7 per cent year over year, marking the largest annual increase since December 2023. On a monthly basis, prices climbed 1.9 per cent — the biggest jump since January 2023.
Statistics Canada said higher prices for fresh fruit, which rose 4.4 per cent from a year earlier, and other food preparations, up 6.6 per cent, were among the key contributors.
CPI excluding gasoline rose 2.6 per cent year over year for the third consecutive month, underscoring that price pressures outside energy remain somewhat firmer.
Despite the sharp increases, Desjardins Group economist Royce Mendes cautioned against reading too much into short-term movements.
“Those categories can be very volatile, so there’s not much signal in those moves,” Mendes wrote, referring to gas and grocery prices.
“The latest inflation numbers point to generally benign price pressures,” he added. “As a result, central bankers can take comfort that a stagflationary environment is not emerging.”
Energy & food move in opposite directions
Gasoline prices continue to play an outsized role in month-to-month inflation swings. While the year-over-year decline in gas prices was smaller than in October, energy inflation remains deeply negative following the elimination of the federal carbon tax last April.
RBC economists Nathan Janzen and Claire Fan noted that energy inflation is now “tracking well below zero,” helping to suppress headline inflation.
Grocery prices, by contrast, have largely trended higher, “consistent with rising agricultural commodity prices over the first half of 2025,” they said.
Porter estimates that inflation will average just over two per cent for all of 2025 — down from 2.4 per cent last year and the lowest annual pace in five years. Roughly half a percentage point of that decline, however, reflects the temporary impact of the carbon tax removal.
“We suspect that without that helping hand after March 2026, next year’s average inflation rate will be closer to 2.5 per cent, with food applying the main pressure,” Porter wrote.
Core inflation eases
Measures of core inflation closely watched by the BoC continued to cool. CPI-median and CPI-trim — long considered the central bank’s preferred gauges — both slowed from October.
The BoC has recently said it is paying closer attention to a broader “dashboard” of indicators to assess underlying inflation trends.
CIBC economist Andrew Grantham noted that two additional measures — CPI-X, which strips out the eight most volatile components, and CPI excluding food and energy — also eased in November.
“Overall though, core inflation is still too high to allow further interest rate cuts, albeit not strong enough to justify recent market pricing for hikes before the end of 2026,” Grantham wrote.
He said CIBC continues to expect the BoC to hold its policy rate steady through next year.
Services cool, durables firm
On a monthly basis, CPI rose 0.1 per cent in November, or 0.2 per cent after seasonal adjustment.
Service inflation slowed to 2.8 per cent year over year, down from 3.2 per cent in October. Travel-related categories drove much of that decline: prices for travel tours fell 8.2 per cent annually and 12 per cent month over month.
At the same time, traveller accommodation prices dropped 6.9 per cent from a year earlier.
Statistics Canada noted that part of the decline reflects base-year effects, as hotel prices in 2024 were boosted by demand linked to Taylor Swift’s concert tour.
Rent inflation also eased, slowing to 4.7 per cent from 5.2 per cent, with price growth moderating across most regions.
Meanwhile, prices for durable goods continued to firm, rising 2.7 per cent year over year after a period of deflation last year. Cellular service prices increased for a second straight year, up 12.7 per cent, as fewer industry-wide promotions weighed on affordability.
Regional picture
Inflation accelerated in five provinces in November. New Brunswick posted the largest increase, with prices rising 2.7 per cent year over year, up from 2.1 per cent in October. Manitoba and Quebec also recorded notable upticks.
For more articles like this, click here.
