RBC Sees Canada's Inflation to Show It's Still Running Above The Bank of Canada's Target

07:04 AM EST, 01/19/2026 (MT Newswires) -- Canada will release the consumer price index data for December at 8:30 a.m. ET on Monday, said RBC.

The bank expects headline inflation to trend broadly sideways in December, matching the 2.2% year-over-year in November. RBC anticipates little-changed core price growth trends that leave inflation still running moderately above the Bank of Canada's inflation target.

An 8% drop in December gasoline prices should push energy prices further below a year ago, pointed out the bank. However, food inflation remained elevated for much of 2025 following a short-lived easing late in 2024. RBC looks for food price growth to rise above 5% in December -- in part due to low after-tax restaurant prices a year earlier during the GST/HST tax holiday.

However, grocery price inflation also remains elevated at 4.7% as of November.

Inflation, excluding food and energy products, is expected to edge lower to 2.3% year over year from 2.4% in November. If realized, this would mark a second consecutive month of improvement. The BoC's median and trim CPI measures were similar year-over-year from the 2.8% increases in November -- still above the BoC's 2% inflation target.

Headline inflation compared with a year ago will continue to be distorted by tax changes. The removal of the consumer carbon tax in most provinces in April 2025 continues to lower annual energy price growth.

The temporary GST/HST tax break introduced in mid-December 2024 (stretching through mid-February 2025) will artificially raise annual price growth in December, added RBC. However, an offsetting rise in pre-tax prices a year ago will limit the impact.

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