Preview: Due March 16 - Canada February CPI - Softer in part due to year ago end of a sales tax holiday
We expect February Canadian CPI to slip to a 6-month and on-target low of 2.0% yr/yr (1.96% before rounding) from 2.3% (2.29% before rounding) in January, the slowing mainly due to the ending of a sales tax holiday a year ago, which lasted from mid-December of 2024 to mid-February of 2025). The Bank of Canada’s core rates will be less sensitive to base effects, but are likely to see moderate slowing, if not yet to the 2.0% BoC target.
The Bank of Canada had expected a brief bounce in headline CPI while the year ago base was depressed by the sales tax holiday but the gains were marginal, suggesting more subdued underlying price pressures was the case a year before.
On a seasonally adjusted basis we expect the picture to remain subdued with gains of 0.2% both overall and ex food and energy in February, in line with recent trend (both series were below trend at 0.1% in January after gains of 0.3% in December). Shelter, which fell by 0.1% in January, is unlikely to be quite as soft in February.
Before seasonal adjustment strong seasonal gains are likely, with overall CPI rising by 0.7% and the ex food and energy rate by 0.6%, though yr/yr growth ex food and energy would still slow to a 15-month low of 2.0% (2.02% before rounding) from 2.4% (2.37% before rounding) in January.
CPI ex food and energy is not one of the BoC’s three core rates. These are less sensitive to tax changes, but are still likely to see some moderate slowing, most significantly in CPI-Common which saw the strongest bounce in February 2025, reducing its yr/yr pace to 2.5% from 2.7%. We expect CPI-Median to slow to 2.4% from 2.5% both before and after rounding. We expect CPI-Trim to be stable at 2.4%, though with modest slippage to 2.39% from 2.44% before rounding.