RBC warns fresh CPI report will show food inflation grew more than 5%
Year-over-year food prices probably rose more than five per cent in December, continuing a trend that hurt Canadians’ pocketbooks at grocery stores and restaurants throughout 2025, say Royal Bank of Canada economists.
RBC, in its preview of Statistics Canada’s December consumer price index (CPI) report coming on Monday, said year-over-year food inflation will be boosted because there were lower after-tax restaurant prices in December 2024 due to a federal GST/HST holiday.
“Grocery price inflation also remains elevated — 4.7 per cent as of November,” Nathan Janzen and Abbey Xu said in a note, adding that it outpaced overall inflation of 2.2 per cent.
Food inflation has been a thorn in Canadians’ sides since the pandemic started.
Inflation for food purchased from stores peaked at 11.4 per cent in November 2022, according to Statistics Canada, and retook that high in January 2023 before slowly cooling. There was some relief in 2024 as inflation floated slightly above and below the Bank of Canada ‘s target for inflation of two per cent.
However, it started to grow again in 2025 and hit a near-term high in November, which was evident across a wide swath of categories, from meat and dairy to fruits and vegetables to sweets and condiments.
Inflation rose 17.7 per cent for fresh and frozen beef in November from a year earlier, while lettuce jumped 26.8 per cent year over year and coffee grew 27.8 per cent.
Many economists are forecasting overall inflation in December to match November’s rate, according to Bloomberg, which tracks their calls.
December’s inflation numbers are the “main event” in next week’s Canadian economic calendar, National Bank of Canada economists Daren King and Jacelyn Paquet, said in a note.
National Bank is an outlier amongst economists in that its CPI prediction calls for the overall rate to slow two-tenths of a percentage point to two per cent, mostly due to an eight per cent drop in gasoline prices.
RBC is also calling for core inflation, which excludes food and energy, to cool slightly to 2.3 per cent from 2.4 per cent, which “would mark a second consecutive month of improvement.”
On the core front, economists generally expect the Bank of Canada’s preferred measures of median- and trim-CPI to both slow slightly in November to 2.7 per cent from 2.8 per cent, according to Bloomberg.
Looking ahead, “headline inflation compared to a year ago will continue to be distorted by tax changes,” Janzen and Wu said, referring to the cancellation of the consumer carbon tax by Prime Minister Mark Carney ‘s government.
The federal GST/HST tax holiday, which ended in mid-February 2025, will also have a similar effect of “artificially” raising price growth, “although an offsetting rise in pre-tax prices a year ago will limit the impact,” they said.
RBC is calling for the Bank of Canada to hold interest rates at the current level of 2.25 per cent in 2026.
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