Inflation holds steady, but food prices continue to rise

Inflation pressures overall look like they’re under control. November’s numbers are steady, though there is still some underlying pressure in goods prices. We’ll be watching the run up in food prices that picked up late this year. Though, the Bank of Canada will focus on core inflation, which showed encouraging signals, easing materially in November. Taken together with the recent run of more positive data, we’re going to be focusing on the details rather than a broad-based re-acceleration in prices. The Bank of Canada will be holding policy where it is for the next few meetings.

Summary

November inflation grew at 2.2% on an annual basis, matching the pace of October. The main contributors to the acceleration in inflation were groceries and a smaller decline in gasoline prices. The main categories decelerating included travel services and rent.

Core inflation eased in November, with the average of median and trim measures growing 2.8%, compared to 3% in October. The three-month average annualized pace of core measures have slowed as well to 2.3% from 2.6% in October, indicating an improvement in the persistence of inflation.

The main contributor to November inflation was food prices which rose 4.2%, up from 3.4% in October. This is the highest increase in food prices since 2023, building on upside price pressures from grocery prices over the past few months. Specifically, some supply in coffee and meat production have resulted in elevated prices. Additionally fresh fruit and vegetables saw higher prices in November inflation.

Cooling in gasoline and shelter helped keep the all-items rate steady. Gasoline was up 1.8% m/m but still down 7.8% y/y, and CPI excluding gasoline ran at 2.6% y/y.

Inflation rose faster in five provinces, led by faster growth in New Brunswick. It cooled in three provinces, with Nova Scotia improving the most from October.

With the Bank of Canada having held the overnight rate at 2.25% on December 10, 2025, this CPI print supports a hold for the next few meetings as the economy picks up and inflation remains near target. The breadth of inflation will be something we’ll need to watch as the economy improves. The share of CPI components growing above 3% (the upper band of the Bank’s target range) is now 41%, up from 36% in July.