Canada Inflation January 2020


Canada: Inflation hits an eight-month high in January

February 19, 2020

Consumer prices increased 0.1% from a month earlier on a seasonally-adjusted basis in January, softer than December’s 0.4% uptick. According to Statistics Canada, higher prices for transportation, food, and clothing and footwear drove the increase in January.

Inflation increased to 2.4% in January (December: 2.2%), which marked the highest level since May 2019 and was likely due to higher gasoline prices at the pump, while the reintroduction of carbon pricing in Alberta also added some upward pressure. January’s reading beat market analysts’ expectations and remained above the 2.0% midpoint of the Central Bank’s 1.0%–3.0% target range for the third consecutive month. Meanwhile, annual average inflation increased to 2.0% in January from 1.9% the month prior.

Commenting on January’s print, James Marple, a senior economist at TD Economics, noted:

“The positive contribution to inflation from higher oil prices will certainly unwind in February, bringing the headline down with it. While oil and gasoline prices rose at the start of January, they plummeted through the month as news around the COVID-19 outbreak spread.”

This year, inflation should be supported by robust wage growth and the recently introduced carbon tax. That being said, developments in commodity prices remain a key risk to the inflation outlook.

In its January monetary policy report, the Bank of Canada projected inflation averaging 1.9% in 2020 and 2.0% in 2021. FocusEconomics Consensus Forecast analysts, meanwhile, see inflation averaging 1.9% in 2020, which is unchanged from the previous month’s forecast. For 2021, our panelists see inflation averaging 1.9% again.

Author:, Economist

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Canada Inflation Chart

Canada Inflation January 20 20 1

Note: Year-on-year and month-on-month variation of seasonally-adjusted consumer price index in %.
Source: Statistics Canada (SC).

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