Canada’s Core Inflation Rate YoY: November 2025 Update and Macro Outlook
The latest Core Inflation Rate YoY for Canada, released on November 17, 2025, registered at 2.90%, slightly above the market estimate of 2.80% and the previous month’s 2.80%. This uptick signals persistent underlying inflation pressures amid a complex macroeconomic environment. Drawing on the Sigmanomics database, this report contextualizes the current reading against recent trends, explores key drivers, and assesses implications for monetary policy, fiscal stance, and financial markets.
Table of Contents
Canada’s core inflation rate, which excludes volatile food and energy prices, is a critical gauge of underlying price pressures. The 2.90% YoY figure for November 2025 marks a modest rise from October’s 2.80%, continuing a gradual upward trend since mid-2025. This rate remains above the Bank of Canada’s 2% target, underscoring persistent inflationary forces despite tightening monetary policy.
Drivers this month
- Shelter costs contributed approximately 0.18 percentage points, reflecting rising rents and home prices.
- Transportation services added 0.10 percentage points amid higher fuel surcharges.
- Used vehicle prices exerted a mild downward pull, subtracting 0.05 percentage points.
Policy pulse
The 2.90% reading sits above the Bank of Canada’s inflation target band, reinforcing the case for continued vigilance. The central bank’s recent rate hikes have yet to fully temper core inflation, suggesting sticky price dynamics in key sectors.
Market lens
Immediate reaction: The Canadian dollar (CADUSD) strengthened 0.30% within the first hour post-release, while 2-year government bond yields rose 5 basis points, reflecting heightened expectations of further monetary tightening.
Core inflation is a foundational macroeconomic indicator that influences monetary policy, wage negotiations, and investment decisions. The Sigmanomics database shows that Canada’s core inflation has oscillated between 2.10% and 2.90% over the past 10 months, with a 12-month average of approximately 2.50%. This persistence above target contrasts with earlier 2025 readings near 2.10% in February.
Monetary policy & financial conditions
The Bank of Canada has raised its policy rate by 125 basis points since early 2025, aiming to cool demand-driven inflation. However, financial conditions remain moderately accommodative, with credit growth steady and mortgage rates only recently rising. The core inflation persistence suggests a lag in monetary transmission.
Fiscal policy & government budget
Fiscal policy remains moderately expansionary, with recent government spending on infrastructure and social programs supporting aggregate demand. The federal budget deficit is projected at 1.80% of GDP for 2025, limiting scope for aggressive fiscal tightening that might otherwise ease inflationary pressures.
External shocks & geopolitical risks
Global supply chain disruptions have eased but remain a factor, especially in transportation and manufacturing inputs. Geopolitical tensions in key commodity-producing regions have kept energy prices elevated, indirectly feeding into core inflation through higher transportation costs.
Market lens
Immediate reaction: Canadian 2-year bond yields rose by 5 basis points, reflecting increased expectations of further rate hikes. The CADUSD currency pair appreciated 0.30%, signaling market confidence in Canada’s economic resilience amid inflation pressures.
This chart reveals a core inflation rate trending upward, reversing a two-month plateau. The persistence above 2.50% suggests that inflation is becoming more entrenched, which may prompt the Bank of Canada to maintain or intensify its tightening cycle.
Looking ahead, Canada’s core inflation trajectory will hinge on several factors, including monetary policy effectiveness, fiscal discipline, and external shocks. We outline three scenarios:
Bullish scenario (20% probability)
- Core inflation falls below 2.50% by Q2 2026 due to stronger monetary tightening and easing supply constraints.
- Financial conditions tighten further, slowing credit growth and dampening demand.
- Global commodity prices stabilize, reducing cost-push inflation.
Base scenario (60% probability)
- Core inflation remains near 2.80–3.00% through mid-2026, reflecting sticky price pressures in shelter and services.
- Monetary policy continues gradual hikes or holds steady to balance growth and inflation risks.
- Fiscal policy remains moderately expansionary but contained.
Bearish scenario (20% probability)
- Core inflation accelerates above 3.20% due to renewed supply shocks or wage-price spirals.
- Monetary tightening lags, allowing inflation expectations to become unanchored.
- Geopolitical risks exacerbate commodity price volatility, feeding into domestic inflation.
Canada’s core inflation rate at 2.90% underscores persistent inflationary pressures despite monetary tightening. The data from the Sigmanomics database reveal a gradual upward trend since early 2025, driven by shelter and transportation costs. Monetary policy faces a delicate balancing act to contain inflation without stifling growth. Fiscal policy and external factors will also play pivotal roles in shaping the inflation outlook. Market reactions suggest confidence in continued policy action but highlight risks of prolonged inflation persistence.
Investors and policymakers should monitor core inflation closely as a barometer of underlying price trends. The evolving macroeconomic landscape demands vigilance to navigate upside and downside risks effectively.
Key Markets Likely to React to Core Inflation Rate YoY
The core inflation rate is a key driver of monetary policy expectations and financial market sentiment. Markets sensitive to interest rate changes, currency strength, and inflation-linked assets typically react strongly to these data. Below are five tradable symbols historically correlated with Canada’s core inflation dynamics:
- RY – Royal Bank of Canada’s stock price often reflects Canadian economic conditions and interest rate expectations.
- CADUSD – The Canadian dollar’s exchange rate versus the US dollar is sensitive to inflation and central bank policy shifts.
- BTCUSD – Bitcoin’s price can react to inflation expectations as an alternative store of value.
- ENB – Enbridge Inc. is influenced by energy prices, which indirectly affect core inflation.
- EURCAD – The Euro to Canadian dollar pair reflects cross-border inflation and monetary policy differentials.
Insight: Core Inflation vs. CADUSD Since 2020
Since 2020, the CADUSD exchange rate has shown a strong positive correlation with Canada’s core inflation rate. Periods of rising core inflation typically coincide with CAD appreciation, driven by expectations of tighter monetary policy. For example, the 2025 inflation rise from 2.10% to 2.90% paralleled a 7% CADUSD gain, highlighting the currency’s sensitivity to inflation data.
FAQs
- What is the Core Inflation Rate YoY in Canada?
- The Core Inflation Rate YoY measures the annual change in prices excluding volatile items like food and energy, currently at 2.90% as of November 2025.
- How does the Core Inflation Rate affect monetary policy?
- Core inflation guides the Bank of Canada’s interest rate decisions, as it reflects underlying price pressures that monetary policy can influence.
- What are the risks to Canada’s inflation outlook?
- Risks include supply chain disruptions, wage pressures, geopolitical shocks, and fiscal policy shifts that could push inflation higher or lower.
Takeaway: Canada’s core inflation rate remains stubbornly above target, signaling the need for continued monetary vigilance amid evolving economic risks.
The November 2025 core inflation rate of 2.90% compares to 2.80% in October and a 12-month average of 2.50%. This steady rise over recent months signals a gradual but persistent inflation build-up. The upward trend contrasts with the early 2025 trough of 2.10% in February, highlighting a shift in inflation dynamics.
Historical comparisons show that the current 2.90% is the highest since July 2025’s 2.70%, marking a notable acceleration. The data suggest that inflationary pressures are broadening beyond transitory factors, with shelter and transportation costs as key contributors.