Canada inflation dipped in December to 1.8%

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Ottawa, Canada — Canadian inflation fell 0.1 percentage points to 1.8 percent in December as a brief sales tax holiday on selected consumer goods kicked off, the government statistical agency said Tuesday.

Canadians paid less in the month as a result of the Goods and Services Tax break for alcohol, food, clothing, shoes, toys and other items, according to Statistics Canada data.

Gasoline prices and travel costs rose, the agency said.

READ: Trump says could impose 25% tariffs on Canada, Mexico on Feb 1

And rent prices and mortgage costs went up but at a slower pace than the previous month.

CIBC analyst Andrew Grantham noted that without the tax change, inflation would have been around 2.3 percent.

Canadian Prime Minister Justin Trudeau’s liberal government brought in the tax relief, saying Canadians facing high costs of living deserved a respite.

But the move was harshly criticized by his finance minister, Chrystia Freeland, as a “costly political gimmick” that the country could “ill afford” ahead of possible US tariffs on Canadian imports promised by President Donald Trump.

Freeland resigned in protest, triggering a political crisis that led to Trudeau announcing his pending departure too.

Grantham noted in a research note that there are “a lot of moving pieces and temporary factors playing out in the inflation data at the moment.”

Despite this volatility, most economists said they expect the Bank of Canada to further cut its key lending rate at the end of January.