Canada Inflation Eases to 1.8% Thanks to Tax Break

By Robb M. Stewart

OTTAWA--Canada's annual inflation rate eased slightly in December to the slowest pace in three months thanks to a federal tax holiday on purchases of restaurant meals, toys and other items.

The country's consumer price index slipped to 1.8% from a year earlier, Statistics Canada said Tuesday. That was in line with market expectations, according to economists at TD Securities.

The decline means inflation has now been at or below the Bank of Canada's target for five months running, though stripping out the effect of the government tax break on purchases of toys, restaurant meals and some other items and the inflation index would have climbed to 2.3% annually.

On a month-over-month basis, prices fell 0.4%, in line with the consensus forecast. On a seasonally adjusted basis, CPI rose 0.2% from the previous month.

Meanwhile, the average of the Bank of Canada's preferred trimmed mean and weighted median measures for underlying inflation cooled to 2.45% on-year from 2.6% the month before, the slowest pace since September.

Write to Robb M. Stewart at robb.stewart@wsj.com