Canada’s latest inflation print has landed at exactly the wrong moment for policymakers: enough progress to calm markets, but enough underlying pressure to keep the Bank of Canada boxed in. Statistics Canada reported annual CPI at 2.3% in January 2026, down from 2.4% in December, with gasoline prices a major drag on the headline number. Yet beneath that surface, inflation is proving stickier—CPI excluding gasoline was up 3.0%, and core measures only eased modestly.

That split is the policy trap. If the Bank cuts too soon, it risks reigniting price momentum in services and shelter-linked components. If it stays restrictive for too long, it could squeeze already fragile household demand and business investment. The Bank held its policy rate at 2.25% on January 28, 2026, citing elevated uncertainty tied to trade disruptions and geopolitical risks.

The January Monetary Policy Report reinforces the dilemma: growth is expected to remain modest while inflation hovers near target, but the outlook is highly vulnerable to external shocks, especially changing trade arrangements. Reuters reporting on today’s CPI release shows markets still reading the data as “cooling, but not cleanly cooled,” with bond yields and the loonie reacting to the mixed signal in core versus headline trends.

For households, this is not abstract central-bank theater. Mortgage renewals, variable-rate debt costs, wage bargaining, and savings returns all hinge on how long rates stay at current levels. For businesses, financing decisions now depend less on a single inflation print and more on whether core disinflation can hold through spring.

The soft-landing narrative is still alive—but increasingly conditional. Canada is no longer in an inflation panic, yet it is not in an all-clear either. The Bank’s “impossible choice” is real: move too early and credibility suffers; move too late and growth cracks widen. In this phase, one month of good headline inflation is relief—not resolution.