Canada CPI Report: February 2026 — Inflation Drops to 1.8%
Statistics Canada released the Consumer Price Index (CPI) report for February 2026 today, March 16. Headline inflation fell sharply to 1.8%, dipping below the Bank of Canada's 2% target for the first time since late 2025.
Headline Overview
| Indicator | Jan 2026 | Feb 2026 | Change (pp) |
|---|
| Headline CPI (YoY) | 2.3% | 1.8% | -0.5 |
| CPI excl. Indirect Taxes (YoY) | — | 1.9% | — |
| MoM Change | 0.0% | +0.5% | +0.5 |
| MoM Seasonally Adjusted | +0.1% | +0.1% | 0.0 |
Key takeaway: Headline inflation fell to 1.8% — half a percentage point below January and below economist expectations. However, the drop is largely mechanical: the GST/HST tax holiday ended mid-February 2025, meaning the base month (Feb 2025) saw prices rise as taxes came back. That base-year effect is now falling out of the 12-month calculation, dragging headline CPI lower. March 2026 will be the final month affected by this distortion.
Key Sector Inflation (Year-on-Year)
| Sector | Jan 2026 | Feb 2026 | Change (pp) |
|---|
| Food (stores / groceries) | 4.8% | 4.1% | -0.7 ⬇️ |
| Food (restaurants) | 12.3% | 7.8% | -4.5 ⬇️ |
| Gasoline | -16.7% | -14.2% | +2.5 🔴 |
| Natural Gas | — | -17.1% | — |
| Shelter | 1.7% | — | — |
| Homeowners' Replacement Cost | — | -2.1% | — |
| Other Owned Accommodation | — | -2.6% | — |
| Cellular Services | 4.9% | 1.5% | -3.4 ⬇️ |
| Alcoholic Beverages (stores) | 7.9% | 5.6% | -2.3 ⬇️ |
| Alcoholic Beverages (licensed) | 9.0% | 6.8% | -2.2 ⬇️ |
| Toys, Games & Hobbies | 8.7% | 5.4% | -3.3 ⬇️ |
| Travel Tours | — | -3.1% | — |
⬇️ Restaurant food dropped sharply from 12.3% to 7.8% — the biggest single effect of the GST base-year distortion unwinding. Still elevated, but moderating fast.
⬇️ Grocery prices eased to 4.1% from 4.8%, with beef prices cooling (13.9% vs 18.8% in Jan). However, groceries have still risen 30.1% since February 2021.
⬇️ Cellular services decelerated from 4.9% to 1.5% as multiple wireless providers launched lower-priced plans.
🔴 Gasoline was still deeply negative (-14.2%) but less so than January (-16.7%). A 3.6% monthly increase in February was driven by rising crude oil prices ahead of the conflict in the Middle East.
Bank of Canada Core Measures
| Measure | Jan 2026 | Feb 2026 | Change |
|---|
| CPI-Trim | 2.4% | 2.3% | -0.1 |
| CPI-Median | 2.5% | 2.3% | -0.2 |
| CPI-Common | 2.7% | 2.4% | -0.3 |
All three BoC core measures moved closer to the 2% target. CPI-trim and CPI-median are now both at 2.3%, their lowest levels in years. This gives the BoC significant room to manoeuvre if economic conditions deteriorate.
Provincial Highlights
Prices rose at a slower pace in all provinces compared with January. Provinces with HST (Ontario, Atlantic Canada) were most affected by the GST/HST base-year effect. Provinces with separate PST were less impacted since PST wasn't included in last year's tax break.
Context & Outlook
GST/HST distortion: March 2026 will be the final month affected by the tax holiday base-year effect. Starting April, the year-over-year comparisons should be much cleaner.
Iran conflict: CBC reports the war's impact on oil prices is not yet reflected in February's data. Economists expect an oil-driven spike in headline inflation in the coming months, though core measures should remain near target.
Bank of Canada: The BoC is widely expected to hold rates steady at its meeting this week (March 2026). With core inflation near 2% and employment weakening, the central bank has flexibility to cut if needed — but is expected to stay on the sidelines for now.
Grocery prices remain a sore spot at 4.1% — still roughly double the headline rate — though the trend is downward.
Source: Statistics Canada, The Daily — Consumer Price Index, February 2026 (released March 16, 2026)
