Canada’s latest inflation report just came out, and while it may look like a small change on paper, it actually matters quite a bit for interest rates, mortgage payments, and buyer confidence — especially here in the Edmonton area.
In January, Canada’s Consumer Price Index (CPI) rose 2.3% year-over-year, slightly down from 2.4% in December. At first glance, a 0.1% drop sounds insignificant — but for economists and the Bank of Canada, it’s an important signal about where borrowing costs could head next.
Let’s break down what actually happened and, more importantly, what it means for homeowners, buyers, and anyone with a mortgage.
Why Inflation Fell
The biggest driver behind the drop in inflation was gasoline prices.
Fuel prices were 16.7% lower than a year ago, a larger decline than in December. This wasn’t because gas suddenly became cheap overnight — it was mainly due to a base-year effect. In early 2025, oil prices were rising sharply, so current prices look much lower in comparison.
However, when you remove gasoline from the calculation, inflation was still sitting at 3.0%, which tells us underlying inflation pressures haven’t completely disappeared.
Some Prices Are Still Rising Quickly
Even though headline inflation cooled, many everyday costs are still climbing — and some quite sharply.
Here are some of the biggest increases:
Restaurant meals: +12.3%
Alcoholic beverages (store): +7.9%
Alcohol in restaurants/bars: +9.0%
Toys & hobby supplies: +8.7%
Children’s clothing: +6.3%
Grocery store food: +4.8%
One interesting change: fresh fruit prices actually fell 3.1%, largely due to strong harvests in producing regions (berries, oranges, and melons led the decline).
The Most Important Part for Homeowners: Shelter Costs
This is where the report becomes especially relevant to real estate and mortgages.
Shelter inflation — which includes rent and mortgage interest — slowed significantly.
Shelter cost growth: 1.7% year-over-year
Rent increases slowed to 4.3%
Mortgage interest cost increases slowed to 1.2%
This is a big deal.
It’s the first time in nearly five years shelter inflation has dropped below 2%. Slower growth in rents and mortgage costs is exactly what the Bank of Canada has been waiting to see after its aggressive rate hikes over the past couple of years.
In simple terms:
Higher interest rates worked. They cooled the housing cost pressure in the economy.
What About Interest Rates?
Here’s the question everyone really wants answered:
Will the Bank of Canada cut rates now?
Probably not yet.
While inflation is easing, the Bank of Canada is still cautious. The central bank recently held its policy rate at 2.25% and has signaled it does not want to stimulate the economy too quickly. Governor Tiff Macklem warned that cutting rates prematurely — especially during economic uncertainty — could reignite inflation.
Another major factor:
Ongoing uncertainty around trade and U.S. tariffs. The Bank wants clearer economic conditions before making a move.
The core inflation measures the Bank watches most closely did improve:
Median inflation: 2.5% (down from 2.6%)
Trim inflation: 2.4% (down from 2.7%)
This is encouraging, but not enough by itself to trigger an immediate rate cut.
What This Means for Buyers
This report actually creates a scenario we often call a “window of opportunity.”
Here’s why:
Interest rates are likely near their peak, but the Bank of Canada is not rushing to cut yet. That means:
Payments are stable
Competition is still moderate
Prices haven’t surged yet
Many buyers are still waiting
Historically, the housing market becomes most competitive after rate cuts begin — not before. When rates drop, demand spikes quickly and prices tend to follow.
What This Means for Homeowners & Renewals
If you have a mortgage renewal coming up, this data is helpful.
Mortgage interest cost inflation slowing strongly suggests:
We are past the worst of rate increases
Variable rates are unlikely to rise again
Fixed rates may gradually trend downward over time
However, waiting without a plan can be risky. Lenders often price renewals higher than necessary because many borrowers simply sign the offer they receive.
This is exactly where a mortgage broker can make a big financial difference — comparing multiple lenders rather than just accepting your bank’s renewal.
The Bottom Line
Inflation is cooling — slowly but steadily.
We are not quite at the stage where the Bank of Canada will immediately cut rates, but the direction is clearly improving. The biggest missing piece right now isn’t inflation anymore — it’s economic certainty.
Once confidence improves, housing activity is expected to rebound, and historically that happens quickly.
For buyers, this is often the calm before the storm.
For homeowners, it’s the time to review your mortgage strategy — not after rates change, but before.
