Canadian inflation eased by 0.1 percentage points to 1.8% in December, aided by a temporary sales tax holiday on select consumer goods, according to Statistics Canada.
The Goods and Services Tax (GST) breaks reduced costs for alcohol, food, clothing, shoes, toys, and other items, offering Canadians some relief.
However, gasoline prices and travel costs increased, while rent and mortgage costs rose at a slower rate than the previous month.
CIBC analyst Andrew Grantham observed that without the tax holiday, inflation would have been closer to 2.3%.
Prime Minister Justin Trudeau’s liberal government introduced the GST relief, describing it as a necessary measure to ease the burden of rising living costs.
However, Finance Minister Chrystia Freeland criticised the move as a “costly political gimmick,” warning of its financial implications amid looming US tariffs on Canadian imports under President Donald Trump’s administration.
Freeland’s resignation over the issue sparked a political crisis, leading to Trudeau announcing his intention to step down.
Grantham noted in a research note that “temporary factors and volatility” are influencing current inflation trends. Despite this, economists widely predict the Bank of Canada will further reduce its key lending rate at the end of January.
