Prices & purchasing power — Canada · Synthesis

Inflation back near target. The consumer price index rose by approximately 2.4% in 2024 (Statistics Canada), after the 2022 peak (≈ 8.1%) and 2023 (≈ 3.9%). The Bank of Canada brought inflation back towards its 2% target through monetary tightening, then began an easing cycle.

Housing, the main source of pressure. The cost of housing (rents, ownership costs, mortgage interest) is one of the main drivers of both perceived and measured inflation (see the Housing category). The housing affordability crisis weighs heavily on the cost of living.

Credit sensitive to rates. The Canadian mortgage market, where loans are frequently renewed at short intervals (5 years), rapidly transmits rate changes to monthly payments — a powerful channel through which monetary policy affects households.

Real wages. Real wages recovered in 2024 as inflation subsided (see the Labour category), after the erosion of 2022.

Energy and food. As elsewhere, energy and food prices rose sharply during the crisis then slowed; the accumulated level remains a concern for lower-income households.

Anchoring inflation at 2%. A lasting return to target depends in particular on the decline in housing costs. The Bank of Canada adjusts its policy accordingly — an analytical horizon, not realized data.

Housing and cost of living. With housing costs central, the evolution of property prices and rents (see the Housing category) conditions purchasing power and perceived inflation.

Rates and mortgage renewals. Renewing loans at higher rates than those taken out during the low-rate period weighs on many households — a challenge specific to Canada.

Carbon pricing. The federal carbon tax ("backstop") has an effect on certain prices (fuels, heating), with a household rebate mechanism — a subject of political debate (see the Environment category).

The open questions. Three challenges will shape the period: (1) anchoring inflation at 2%; (2) containing housing costs; (3) managing mortgage renewals at higher rates.

Placed in its environment, Canada experienced an inflationary shock comparable to that of other wealthy countries, followed by a decline, with a particularly heavy housing cost component.

Three takeaways. (1) A peak around the average. At ≈ 8.1% in 2022, Canada's peak is close to that of the United States (≈ 8.0%) and Germany, above France.

(2) A comparable decline. The 2024 inflation rate (≈ 2.4%) is close to that of the United States, the United Kingdom, France and the EU average.

(3) The weight of housing. The share of housing in the pressure on the cost of living is particularly marked in Canada, owing to the affordability crisis (see the Housing category).