Canada’s latest Consumer Price Index (CPI) release closed out 2025 with a surprise uptick. Statistics Canada reported that headline inflation rose to 2.4% year-over-year in December 2025, above expectations that inflation would hold steady near the prior month’s pace.

At first glance, a higher CPI print can look concerning. However, when we look “under the hood,” the details suggest there is limited reason to assume a major change in interest-rate direction based on this report alone.

For Alberta and Calgary real estate, the key takeaway is not simply the CPI headline — but what inflation implies for interest rates, borrowing costs, and buyer timing in 2026.

1) Why inflation rose to 2.4% — and why it may not be as alarming as it looks

The December CPI print was higher than expected, but much of the acceleration appears to reflect temporary distortions and year-over-year comparison effects, rather than a broad re-acceleration in underlying inflation pressure.

Statistics Canada noted that the rebound from the federal government’s temporary tax holiday (GST relief) was a key factor behind the higher year-over-year CPI figure. In late 2024, removing GST on selected items lowered prices for certain categories such as dining out and other eligible goods. As a result, the year-over-year comparison in December 2025 mechanically pushed CPI higher.

One notable example was restaurant meals, where prices saw a large annual increase in December, contributing to the acceleration in the headline CPI number.

In short: the “surprise” was real, but the composition suggests it was at least partly driven by a base effect rather than a structural inflation shock.

2) Food inflation remains elevated — Canadians still feel the pressure

While headline inflation can move due to short-term factors, food prices remain a major pain point for households.

In December, the price of food purchased from grocery stores rose notably year-over-year. Certain items such as coffee and beef also posted strong annual increases. Even where some categories saw monthly stabilization, the overall reality is that grocery costs remain materially higher than they were a few years ago.

This matters for consumer psychology: even when inflation is trending lower overall, the categories people “feel” most — groceries, shelter, and transportation — drive perception and spending behaviour.

3) Gasoline provided offset — energy remains a volatile inflation driver

Offsetting some of the inflation pressure, gasoline costs declined meaningfully year-over-year in December. Energy tends to be volatile, and changes in crude oil supply and global market dynamics can swing CPI readings from month to month.

That’s why professional inflation interpretation focuses less on any single energy-driven month and more on persistent, underlying inflation trends.

4) The Bank of Canada’s real focus: underlying inflation (not just the headline)

For interest-rate direction, headline CPI is only part of the picture.

The Bank of Canada places significant attention on underlying inflation measures (such as CPI-trim and CPI-median), which help filter out volatile components and provide a clearer view of the trend. Recent data has shown key underlying metrics continuing to moderate, suggesting inflation is trending closer toward the central bank’s target range over time.

This is why many economists argue that while the headline CPI surprise “looked hot,” the internal details were less concerning — particularly because core measures appear to be improving gradually.

5) Interest-rate implication: why this CPI report may not force a policy shift

This inflation report arrived just before the Bank of Canada’s first interest-rate decision of 2026. The central bank’s benchmark rate has been held at 2.25%.

Based on the composition of the inflation data — including base effects and volatile categories — many market participants interpret this report as consistent with a continued hold scenario, rather than a catalyst for renewed tightening.

At the same time, economists remain cautious: while progress exists, underlying inflation still needs to clearly settle closer to the Bank of Canada’s 2% target before sustained policy easing becomes likely.

6) What this means for Alberta & Calgary real estate in 2026

For Calgary buyers and sellers, CPI data matters because inflation influences interest rates, and interest rates influence mortgage affordability and market activity.

There is an important market reality to highlight:

Housing markets often move on rate expectations — not just rate changes.

When the market begins to believe that interest rates may become less restrictive over time, buyer confidence can return quickly. In Calgary, this can be amplified by tight inventory conditions in certain segments.

That is why Calgary often feels slow for a period — and then accelerates rapidly when conditions shift.

7) REAB’s perspective: don’t “guess the Bank” — build readiness

Attempting to time real estate decisions around monthly CPI headlines is rarely effective. A stronger approach is to build readiness early, so you can act decisively when the right opportunity appears.

For Calgary buyers, readiness includes:

1. Pre-approval clarity — knowing your true borrowing power

2. Stress-tested affordability — planning conservatively

3. Defined target strategy — communities, property type, and walkaway rules

The biggest risk is not buying too early. The biggest risk is being unprepared when the market turns faster than expected.

Conclusion

December’s inflation report delivered a headline surprise, but the underlying drivers suggest limited cause for immediate alarm. For Alberta and Calgary, the more relevant story is how inflation shapes interest-rate expectations — and how quickly housing activity can respond once confidence shifts.

If you’d like my one-page Calgary guide — “Inflation → Rates → Housing: A Calgary Buyer’s Checklist” — comment or DM “CPI” and I’ll send it to you.

— REAB | reab.ca