National Bank Says Canada's CPI Kicks Off 2026 on A Positive Note

11:49 AM EST, 02/17/2026 (MT Newswires) -- Canadian inflation data started the year on a positive note with annual inflation at 2.3%, while economists had generally expected 2.4%, said National Bank after Tuesday's release of the January Consumer Price Index (CPI).

It remains important not to rely too heavily on total year-over-year inflation to assess inflationary pressures, as this measure is heavily impacted by the tax holiday on several goods and services that occurred between December and February last year (upward impact).

Added to this is the withdrawal of the carbon tax in April, a downward impact.

According to Statistics Canada estimates, these factors combined had an overall upward effect on prices of two-tenths of a percentage point, with the tax-exclusive measure standing at 2.1% on an annual basis, essentially in line with the Bank of Canada mid-point target.

There are certainly specific factors, such as gasoline, that contribute to improving the annual picture with a 16.7% decline, and some might argue that despite Tuesday's positive surprise, annual core inflation remains too high at 2.5% for the CPI-Median and 2.4% for the CPI-Trim.

In National Bank's opinion, it is seeing the glass as half empty rather than half full. Indeed, it sees the momentum of inflation in Canada in recent months is very encouraging. Over the past two months, the CPI-trim and CPI-median have recorded their lowest increases since 2020, at the height of the pandemic.

Over three months, the average of the two measures rose at a rate of only 1.2%, also the lowest since May 2020. Even assuming an inflation rebound at an annualized rate of 2.0% in the last two months of the quarter, annual core inflation would be one-tenth lower than the 2.5% expected for Q1 by the Bank of Canada in its recently published forecast.

Overall, Tuesday's report isn't expected to radically change the BoC's view that current interest rates are appropriate to keep inflation close to 2.0%, stated the bank. Due to the current uncertainty, the labor market has a surplus of workers on the sidelines, which is reflected in a significant moderation in wage pressures.

The good news from the last two months of CPI data is that, should the economy unexpectedly deteriorate amid heightened trade tensions, the BoC will have the flexibility to provide additional support, added National Bank.

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