Canada’s annual inflation rate climbed to 2.4 per cent in December, according to Statistics Canada, up from 2.2 per cent in November.
A poll of economists heading into the data release had expected the annual inflation rate would hold steady at 2.2 per cent.
The rise in inflation is mainly due to the GST/HST holiday in 2024, which temporarily lowered prices, making current prices look higher by comparison.
“The inflation rate is still broadly in line with the Bank of Canada’s two per cent target, which is generally good news,” Shelly Kaushik, senior economist at BMO Capital Markets, said. “However, the fact that inflation accelerated from the previous month suggests risks are pointing slightly toward hotter inflation.”
One of the biggest surprises in December came from air travel costs.
Kaushik said that airfares jumped nearly 35 per cent month-over-month, marking the second-largest increase on record, which pushed the overall inflation number higher than expected.
Despite the headline increase, Kaushik said that month-to-month prices fell, the rise is largely a statistical effect rather than a sign of new price pressures.
“That’s a big reason why the inflation rate accelerated,” she said. “The GST/HST holiday will continue to raise the yearly change in February as well.”
Even though prices went up overall, the main inflation measure (not counting food and gas) is still going down and is close to the Bank of Canada’s two per cent target.
Kaushik said this measure is more important for understanding where inflation is truly headed.
“The headline number can be swayed by outliers and volatility in any given month,” she said. “Core inflation tries to remove those outliers, which makes it a better measure of underlying price pressures.”
Kaushik said that core inflation is still a bit higher than the target, which means some prices are still staying high.
Food prices rose five per cent year-over-year, with particularly sharp increases in coffee and beef. According to Statistics Canada, coffee prices jumped more than 30 per cent, while fresh or frozen beef rose 16.8 per cent in December.
Kaushik said these increases are largely driven by supply issues and global conditions.
“Market and weather conditions have lowered the supply of coffee and cattle stock in recent years,” she said. “That has pushed up prices for items like coffee, beef, and even chocolate.”
Gasoline prices, meanwhile, fell 13.8 per cent, helping keep overall inflation from rising further. Although gas makes up just over three per cent of the consumer price index.
Kaushik said its volatility can significantly affect monthly inflation readings.
For many students, however, the impact of rising everyday costs feels far more intense than the official data suggests.
“My grocery bills have jumped significantly this semester, and it feels like coffee, rent, and snacks are becoming unaffordable for students like me,” said Priya Kaur, a final-year business student at Humber Polytechnic.
Emily Moran, a culinary student at Humber, said students are being forced to adjust their spending habits.
“I’ve started meal prepping and tracking my expenses more closely because rising prices for groceries, coffee, and public transportation are affecting my budget,” Moran said.
Kaushik said this gap between inflation data and lived experience is common, especially for students and renters.
“The CPI measures what the average Canadian buys, but students have very different spending habits,” Kaushik said. “Groceries and gas also play a bigger role in how people perceive inflation because they’re purchased more frequently.”
Housing costs are making things even more expensive for people.
In December, shelter costs rose 4.9 per cent year-over-year, while mortgage interest costs increased just 1.7 per cent. For students living off-campus or sharing apartments, this creates additional financial pressure.
“Lower-income groups, including students and renters, are generally more vulnerable to inflation,” Kaushik said. “When prices rise, especially for essentials like food, there’s less flexibility to absorb those increases.”
Despite the higher-than-expected inflation reading, Kaushik said the report is unlikely to change the Bank of Canada’s interest-rate outlook.
“There’s very little here to meaningfully change the outlook,” she said. “Inflation is around two per cent, core measures have cooled slightly, and we expect the Bank of Canada will stay on hold for the time being.”
For students watching prices climb month after month, Kaushik said about one key takeaway.
“It’s important to look at trends, not just one month in isolation,” she said. “While inflation came in a bit stronger than expected, the underlying picture hasn’t changed much.”
Canada’s inflation may look moderate on paper, but for students juggling tuition, rent, and food, the rising cost of everyday life continues to be a real and pressing challenge.
