Canadians enjoyed a slight break in December as the country's annual inflation rate dropped to 1.8%, partly due to a temporary federal tax "holiday."
Statistics Canada (StatsCan) reported that the annual pace of inflation cooled to 1.8% last month, down from 1.9% in November.
The December figures captured part of the federal government's GST/HST "holiday," which started on December 14 and runs for two months.
This "holiday" removes the federal portion of the tax on selected items.
StatsCan pointed out that categories directly affected by the tax break, including food bought from restaurants and alcoholic beverages, experienced a significant slowdown in both annual and monthly price increases.
While the temporary tax holiday may offer Canadians some relief, policymakers will watch whether inflation remains near the Bank of Canada's two percent target once the tax "holiday" ends.
