Canada’s February 2026 inflation figures show how quickly the inflation outlook can change. In February, Canada’s annual inflation rate fell to 1.8% as last year’s figures were distorted by the sharp rise in prices due to the end of the government’s goods and services tax (GST) relief. The February 2026 figure does not yet reflect the March energy shock, when oil prices surged 37% because of the Iran war. Rising energy costs will likely rewrite Canada’s inflation trajectory for the months ahead. The big question is: Will this be a repeat of 2022?
Source: Getty Images
Will Canada’s inflation outlook repeat 2022?
In 2022, the Russia-Ukraine war created an energy shock that spiked inflation. Canadians, flush with pandemic savings, continued spending despite rising prices. Revenge travel and splurging drove demand higher, pushing inflation to a peak of 9.1% in June 2022. The Bank of Canada responded with aggressive interest rate hikes from April 2022 to October 2023 to cool consumption.
This time, the world is more prepared for the shock. The Bank of Canada is watching the situation carefully. It has kept the interest rate unchanged at 2.25% while monitoring the impact of rising oil prices. Whether inflation will surge again depends on how quickly consumption reacts to higher costs.
| Month | Canada Inflation Numbers |
| Feb-22 | 5.7% |
| Mar-22 | 6.7% |
| Apr-22 | 6.8% |
| May-22 | 7.7% |
| Jun-22 | 9.1% |
| Jul-22 | 8.5% |
| Aug-22 | 8% |
| Sep-22 | 8.2% |
| Oct-22 | 7.7% |
| Nov-22 | 7.1% |
| Dec-22 | 6.5% |
Stocks that beat inflation
The 2022 inflation cycle taught investors a key lesson: companies with lower production costs outperform. While most sectors corrected sharply, Loblaw (TSX:L), Dollarama (TSX:DOL), and Lundin Mining (TSX:LUG) rose 8%, 9%, and 22%, respectively. Their cost advantage helped them thrive even as peers struggled.
- Loblaw & Dollarama: Offered discounted groceries and consumer goods, attracting cost‑conscious shoppers.
- Lundin Mining: Benefited from the lowest all‑in sustaining cost (AISC) among peers, driving profitability despite volatility.
How to adjust your portfolio for inflation
Canada is once again facing energy shocks, and this time, consumption may not increase despite rising prices. Defensive stocks could be the best hedge against rising inflation.
- Hold Defensive Plays: Loblaw, Dollarama, and Lundin Gold offer stability when inflation rises.
- Exit Oil Stocks at Peaks: Oil stocks will rally short term, but once prices cross affordability thresholds, demand falls, and corrections follow.
- Avoid Lending Stocks: If the Bank of Canada raises rates, banking and lending stocks could suffer.
If you are holding oil stocks and lending stocks, now may be a good time to exit while they trade closer to their all-time high and invest in the defensive plays of Loblaw, Dollarama, and Lundin Gold. Later, when inflation cools, you could consider investing in bank stocks like the Royal Bank of Canada, energy stocks, and tech stocks.
Your 2026 portfolio rebalancing
When investing, always look for companies with lower leverage on their balance sheet. High leverage could spell trouble in a rising interest rate environment. Some good growth stocks to buy on the dip are Bombardier, Celestica, and Shopify. They have manageable debt on their balance sheet, strong demand for their products, and improved margins.
- Bombardier stock was enjoying the customs duty exemption from the United States-Mexico-Canada Agreement (USMCA). The stock could face short-term pressure from the outcome of the USMCA renewal on July 1 but could rebound in the second half of 2026.
- Celestica will continue to enjoy strong orders for Ethernet switches, storage, and other solutions from hyperscalers.
- Shopify will continue to drive revenue, especially from its AI-driven tools.
Long-term investors could consider buying them at the dip.
