Breaking News: Canadian CPI Eases From 3-Month High, USD/CAD Extends Gain...
•February 17, 2026
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Why It Matters
The softer headline and core inflation reduce immediate pressure on the Bank of Canada to raise rates, while sector‑specific spikes highlight lingering supply‑side risks. This balance shapes monetary policy and influences the Canadian dollar’s trajectory.
Key Takeaways
- •CPI fell to 2.3% in January, below expectations
- •Trimmed‑mean core inflation 2.4%, lowest since April 2021
- •Food up 7.3%, restaurants up 12.3% post‑tax break
- •Transportation deflation hit -17% due to gasoline plunge
- •BoC likely to hold rates at 2.25% on March 18
Pulse Analysis
Canada’s inflation picture is gradually aligning with the Bank of Canada’s 2% target, but the path remains uneven. The headline CPI’s dip to 2.3% reflects a combination of base‑effect normalization and a sharp decline in transportation costs, driven by a 17% plunge in gasoline prices. Shelter and household goods have also moderated, yet food and restaurant categories are now the primary sources of upward pressure, posting double‑digit year‑over‑year gains after the expiration of temporary tax reliefs. Analysts view the trimmed‑mean core rate, now at 2.4%, as a more reliable gauge of persistent inflation, suggesting that once the temporary food spike fades, price dynamics could stay comfortably below the central bank’s 2% ceiling.
For policymakers, the latest figures bolster a “wait‑and‑see” stance ahead of the March 18 BoC meeting. The core slowdown reduces the urgency for a rate hike, allowing the bank to maintain its 2.25% policy rate while monitoring the durability of the recent deflationary trends. Nonetheless, the sharp rise in food‑related costs poses a risk if supply constraints or further tax policy changes reignite broader price pressures. Market participants will be watching the BoC’s forward guidance for clues on whether the central bank will pivot to a more accommodative tone or signal a gradual tightening path should inflation re‑accelerate.
On the foreign‑exchange front, the USD/CAD pair continues its modest advance as the U.S. dollar regains momentum after a period of CAD strength. Technical charts show resistance near 1.3700 and a 200‑day moving average at 1.3817, while support sits around 1.3500. A breach of the 1.3500 level could trigger further downside, whereas a sustained rally above 1.3750 may signal renewed bullish pressure on the Canadian dollar. Traders are therefore balancing the macro‑economic backdrop of easing inflation against the currency’s technical trajectory, with particular focus on how BoC policy signals will intersect with U.S. monetary dynamics.
Breaking News: Canadian CPI eases from 3-month high, USD/CAD extends gain...
Canada’s annual inflation rate fell to 2.3 % in January 2026, slightly lower than expected and aligned with the Bank of Canada’s forecasts.
The trimmed‑mean core rate, a key measure of underlying price pressures, dropped to 2.4 %, its lowest level since April 2021.
While shelter and furniture costs cooled, food prices surged 7.3 % and restaurant costs jumped 12.3 % as previous tax breaks expired.
Published February 17 2026 – by Zain Vawda, Market Analyst
Canadian CPI Overview
Canada’s headline inflation rate eased slightly in January 2026, dipping to 2.3 % from a three‑month high of 2.4 % in December. The figure came in just under market expectations and aligned with the Bank of Canada’s forecasts, which had projected inflation near 2.5 % before eventually dropping below the 2 % target. A significant driver of these year‑over‑year figures remains the base effects from the GST/HST tax break implemented in January 2025.
The cooling of the overall rate was largely propelled by a sharp deepening of transportation deflation, which hit ‑17 % following a nearly 17 % plunge in gasoline prices. Additionally, cost pressures moderated in the shelter sector (slowing to 1.7 %) and for household operations and furnishings (dropping to 2.5 %).
Sector highlights
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Food prices accelerated to 7.3 %, driven by the expiration of previous tax breaks.
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Restaurant prices saw a particularly steep jump, rising by 12.3 %.
Despite these specific spikes, underlying inflationary pressures appear to be receding. The trimmed‑mean core rate, a key metric for the Bank of Canada, fell to 2.4 %, its lowest level since April 2021 and well below the 2.6 % anticipated by analysts.
Source: Statistics Canada
Implications for the Bank of Canada
Based on the latest data, the Bank of Canada (BoC) is currently in a “wait and see” mode. Today’s inflation report of 2.3 % reinforces the narrative that the central bank will likely hold interest rates steady at its next meeting on March 18 2026.
The case for a “hold” at 2.25 %
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Alignment with projections: Results were “loosely aligned” with the BoC’s own forecast of 2.5 % for early 2026, reducing immediate pressure to hike rates.
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Core progress: The drop in the trimmed‑mean core rate to its lowest level since April 2021 is a “green flag” for the Bank, suggesting that once the temporary tax‑related spikes in food and restaurant prices fade, underlying inflation is well‑contained.
Technical Outlook – USD/CAD
From a technical standpoint, USD/CAD continues its advance.
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The resurgence in the US dollar has helped the greenback gain ground after the significant rally the CAD experienced between Nov 25 and Jan 29.
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Since then, the US dollar has posted solid gains but remains some way off fully recovering the November‑to‑January sell‑off.
Key levels:
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Immediate resistance at 1.3700, followed by 1.3750 and the 200‑day moving average at 1.3817.
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Support at 1.3500; a break below would be needed for further downside.
USD/CAD Daily Chart, February 17 2026
Source: TradingView
About the Author
Zain Vawda – Market Analyst
Zain is an experienced financial‑markets analyst and educator with a strong background in retail forex, economics, and market analysis. He has spent the last three years in an analyst role, focusing on technical analysis, economic data interpretation, price‑action strategies, and geopolitical impacts on global markets. He is currently pursuing the Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI).
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