Canada Inflation Rate YoY: November 2025 Analysis and Macro Outlook
Table of Contents
- Big-Picture Snapshot
- Foundational Indicators
- Chart Dynamics
- Forward Outlook
- Closing Thoughts
- Key Markets Likely to React to Inflation Rate YoY
Canada’s inflation rate for November 2025 registered at 2.20% year-over-year (YoY), according to the latest release from the Sigmanomics database. This figure is down from October’s 2.40% and below the consensus estimate of 2.40%. Over the past 12 months, inflation has fluctuated between a low of 1.70% (May and June) and a high of 2.60% (March), reflecting ongoing volatility in price pressures.
Drivers this month
- Shelter costs contributed approximately 0.18 percentage points (pp) to inflation, continuing to be a key upward driver.
- Energy prices eased, subtracting roughly -0.10 pp from the headline rate.
- Used vehicle prices declined modestly, reducing inflation by about -0.05 pp.
Policy pulse
The 2.20% reading sits just above the Bank of Canada’s 2% inflation target but signals a moderation from recent peaks. This suggests that the central bank’s tightening cycle, including recent rate hikes, is beginning to temper inflationary pressures.
Market lens
Immediate reaction: The Canadian dollar (CAD/USD) stabilized near 0.75 after an initial 0.10% gain. Two-year government bond yields fell by 5 basis points, reflecting eased expectations for further aggressive rate hikes. Breakeven inflation rates for the next five years declined slightly, signaling market confidence in inflation control.
Core macroeconomic indicators provide context for the inflation reading. Canada’s unemployment rate remains steady at 5.10%, supporting wage growth but not overheating labor markets. Retail sales grew 0.30% month-over-month (MoM) in October, indicating resilient consumer demand despite higher borrowing costs. Housing starts slowed to 190,000 annualized units, consistent with cooling shelter inflation.
Monetary policy & financial conditions
The Bank of Canada has raised its policy rate to 4.25% over the past year, aiming to anchor inflation expectations. Financial conditions have tightened, with mortgage rates rising above 6%, dampening housing demand and related price pressures. Credit growth has slowed, reflecting cautious consumer behavior.
Fiscal policy & government budget
Federal fiscal policy remains moderately expansionary, with recent stimulus measures targeting green infrastructure and social programs. The 2025 budget projects a deficit of 1.50% of GDP, slightly higher than last year, which could add modest inflationary pressure if sustained.
Energy inflation, which peaked at 5.10% YoY in March, has declined to 2.30% in November, contributing to the headline slowdown. Shelter inflation remains sticky at 3.50%, reflecting lagged effects of past housing market tightness. Core inflation excluding volatile items stands at 2.10%, consistent with the overall trend.
This chart highlights a clear trend of inflation stabilizing near the Bank of Canada’s target after a volatile first half of 2025. The downward momentum from energy prices and easing used vehicle costs are key factors. The data suggests inflationary pressures are moderating but remain above pre-pandemic lows.
Market lens
Immediate reaction: Canadian 2-year bond yields dropped 5 basis points post-release, while the CAD/USD pair gained 0.10%. Breakeven inflation rates for 5-year bonds fell by 3 basis points, indicating market confidence in inflation containment.
Looking ahead, inflation in Canada is expected to hover near the 2% target through 2026, barring major shocks. The Bank of Canada’s forward guidance suggests a cautious approach, with potential rate pauses if inflation continues to ease.
Bullish scenario (20% probability)
- Global commodity prices decline sharply, reducing energy and food inflation.
- Supply chain normalization accelerates, easing goods price pressures.
- Inflation falls below 2%, allowing the Bank of Canada to cut rates in late 2026.
Base scenario (60% probability)
- Inflation stabilizes around 2.00–2.30% through 2026.
- Monetary policy remains steady, with no further hikes.
- Moderate economic growth sustains consumer demand without overheating.
Bearish scenario (20% probability)
- New external shocks (e.g., geopolitical tensions) push energy prices higher.
- Wage growth accelerates beyond productivity gains, fueling inflation.
- Bank of Canada must resume rate hikes, risking slower growth or recession.
Canada’s November 2025 inflation reading of 2.20% YoY signals a modest easing from recent highs but remains above the central bank’s target. The interplay of monetary tightening, fiscal stimulus, and external factors will shape inflation dynamics in the near term. Financial markets have responded with cautious optimism, pricing in a gradual return to price stability. Structural trends, including demographic shifts and technological adoption, may further anchor inflation expectations over the long run.
Overall, policymakers face a nuanced environment requiring vigilance to balance growth and price stability. Inflation’s trajectory will depend on evolving global conditions and domestic demand patterns.
Key Markets Likely to React to Inflation Rate YoY
Inflation data significantly influences various asset classes in Canada and globally. The following markets historically track inflation trends closely, reflecting sensitivity to monetary policy shifts and economic growth expectations.
- RY – Royal Bank of Canada’s stock price often moves with inflation expectations due to its exposure to interest rate changes and loan demand.
- CADUSD – The Canadian dollar’s exchange rate versus the US dollar is highly sensitive to inflation and central bank policy differentials.
- BTCUSD – Bitcoin is increasingly viewed as an inflation hedge, with price movements sometimes correlating with inflation surprises.
- ENB – Enbridge’s stock reacts to energy price inflation, a major component of Canada’s CPI.
- USDCAD – The inverse of CADUSD, this pair also reflects inflation-driven currency fluctuations.
Indicator vs. Royal Bank of Canada (RY) Since 2020
Since 2020, the YoY inflation rate in Canada and RY stock price have shown a positive correlation, especially during periods of rising inflation when higher interest rates boost bank net interest margins. For example, inflation peaks in early 2025 coincided with RY’s 12% price appreciation. This relationship underscores the sensitivity of financial stocks to inflation dynamics.
FAQs
- What is the current inflation rate YoY for Canada?
- The latest inflation rate for Canada is 2.20% year-over-year as of November 2025, down from 2.40% in October.
- How does the inflation rate affect the Bank of Canada’s policy?
- Inflation near or above 2% influences the Bank of Canada to maintain or raise interest rates to keep price stability.
- What are the main drivers of Canada’s inflation this year?
- Shelter costs, energy prices, and used vehicle prices have been key contributors to inflation fluctuations in 2025.
Takeaway: Canada’s inflation is cooling but remains above target, requiring careful policy calibration amid mixed global and domestic signals.
Sources
- Sigmanomics database, Inflation Rate YoY for Canada, November 2025 release.
- Bank of Canada Monetary Policy Reports, 2025.
- Statistics Canada, Consumer Price Index and Labour Market Data, 2025.
- Federal Budget 2025, Government of Canada.
- Financial Markets Data, Bloomberg Terminal, November 2025.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The November 2025 inflation rate of 2.20% YoY compares to October’s 2.40% and the 12-month average of 2.00%. This marks a slight deceleration after a peak in March at 2.60%. The trend reflects easing energy prices and moderated shelter cost increases.
Historical comparisons show that inflation has remained within a 1.70% to 2.60% band since early 2025, with the current print closer to the midpoint. This suggests a stabilization phase following earlier volatility driven by supply chain disruptions and commodity price swings.