Canada CPI Jan 2025: Inflation at 3.2% as Shelter Costs Keep Rates Higher for Longer
Statistics Canada reported January 2025 Consumer Price Index (CPI) rose 3.2% year‑over‑year, down from 3.4% in December but still above the Bank of Canada’s 2% target. Core inflation (CPI‑trim and CPI‑median) averaged 3.4%, and three‑month annualized inflation increased to 3.8%, signalling persistent underlying pressures. Shelter was the main driver — housing costs rose 6.2% y/y, contributing about 1.8 percentage points to headline inflation; mortgage interest costs surged 28.3% y/y and rents climbed 7.8% (Vancouver 9.2%, Toronto 8.7%). Food inflation eased to 4.8% and energy fell 1.2% (gasoline down 3.4%), while services inflation remained elevated at 4.1%. Regional variation persisted, with Atlantic provinces seeing higher inflation than the West.
Markets reacted quickly: government bond yields rose and the Canadian dollar strengthened as traders moved expected Bank of Canada rate cuts farther out — from bets on April easing to a consensus for mid‑2025 or later. Economists and former BoC officials warned that sticky services and shelter inflation, together with a tight labour market, make early cuts unlikely. The report implies a longer period of restrictive policy and higher-for-longer rates.
Implications for crypto traders: this CPI print increases sensitivity across fixed income, FX and risk assets including crypto. Higher yields and a firmer CAD historically pressure risk-on assets. Expect heightened volatility around Bank of Canada communications (notably the March 5 policy date) and reduced likelihood of early rate cuts, which can weigh on growth-sensitive crypto positions. Traders should monitor yields, BoC guidance, CAD strength, and US CPI/ Fed signals for cross-market spillovers into BTC, ETH and other risk assets.
Bearish
The CPI report signals persistent underlying inflation — core measures and shelter costs remain high — which pushes the expected timing of Bank of Canada rate cuts later. Higher-for-longer policy typically raises bond yields and strengthens the domestic currency, both of which historically pressure risk assets including cryptocurrencies. In the short term, traders should expect increased volatility and downward pressure on crypto prices as investors reallocate toward safer, yield-bearing instruments and respond to rising real yields. Over the medium term, a sustained restrictive rate environment can reduce liquidity and risk appetite, maintaining bearish pressure on crypto unless growth or deflationary signals emerge. Key variables to watch: Canadian and US yield moves, BoC communications (notably March 5), CAD strength, and global risk sentiment.