Inflation

Inflation in Canada: A Simple Guide

Inflation is the rate at which the general level of prices for goods and services is rising. In Canada, it is measured primarily by the Consumer Price Index (CPI).

How is it measured?

Statistics Canada tracks the price of a "basket" of over 700 goods and services that the average Canadian family buys. This includes:

Shelter: Rent and mortgage interest costs.
Food: Groceries and restaurant meals.
Transportation: Gas prices and vehicle insurance.

Why does it matter?

When inflation is too high, your money loses "purchasing power." For example, if inflation is 5%, a $100 grocery bill from last year would cost $105 today for the same items.

The Bank of Canada’s Role

The Bank of Canada has a "target" to keep inflation at 2%. To control inflation, the Bank uses the Overnight rate:

If inflation is too high: The Bank raises interest rates to slow down spending.
If inflation is too low: The Bank lowers interest rates to encourage borrowing and spending.

Current Status (December 2025)

As of December 16, 2025, Canada’s inflation rate sits at 2.2%. While this is near the 2% target, many Canadians still feel the "price shock" of groceries and rent, which have risen faster than the overall average.