Date: May 21, 2024

Category: Blogs,Mortgage Tips & Advice

How Do the Inflation Numbers Affect You? 📉🏠

Canadian inflation eased again in April to a three-year low, which offers more of a chance of a June rate reduction from the Bank of Canada—or does it? 🤔

Latest Breakdown:

  • Headline Inflation Rate:
    • Eased to 2.7% in April from 2.9% in March. – that’s good! 👍
  • Bank of Canada (BoC):
    • Inflation numbers are still on the upper limit of the BoC’s neutral range, so the odds are 50/50 that we will see a rate reduction in prime on June 5th, 2024 ⚖️
  • Statistics Canada:
    • Reported the slowdown was driven by lower food prices, services, and durable goods 🛒

Core Inflation Measures:

  • CPI-Median:
    • Slowed to 2.6% from 3.1% 📉
  • CPI-Trim:
    • Fell to 2.9% from 3.2% 📉
  • CPI-X:
    • Flat in April, annualized rate of 1.6% 📊
  • Shelter Costs:
    • Eased to an annualized rate of 6.4% from 6.5% 🏠
  • Rent Inflation:
    • Slowed to 8.2% from 8.5% 🏢
  • Mortgage Interest Cost:
    • Eased to 24.5% from 25.4% 💸

What Are the Experts Saying and Predicting?

  • Douglas Porter, BMO’s Chief Economist:
    • Indicates that current core measures are at lows not seen since mid-2021.
    • Notes the “door is open” for a Bank of Canada rate cut in June but it remains a “close call.” 🗣️
  • Leslie Preston, TD Economics:
    • Suggests a July cut is more likely, needing further confirmation.
    • Says we are too close to the top of the BoC’s range and expects the bank will want more confirmation before lowering rates, leaning towards a July cut 📆

What Are the Bond Markets Indicating?

  • June Rate Cut:
    • 53% chance for a 25-bps cut 🪙
  • July Rate Cut:
    • 72% chance for a quarter-point cut 📉

Where Does This Leave Us?

Easing inflation rates and favorable economic indicators suggest the Bank of Canada might soon reduce interest rates, potentially lowering mortgage costs and easing financial pressures for Canadians 💡.

However, while there is speculation about a June rate cut, it might still be too soon for the BoC to take action. Cutting rates too early could lead to increased real estate values and potentially cause interest rates to rise again. It’s likely the BoC will hold off until inflation gets closer to the 2.5% target before making any rate cuts. Time will tell ⏳.

What Do You Think?

I’m curious about your thoughts. Do you think the BoC will cut rates in June, or will they wait until July? Share your opinions! 💬

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Talk soon,

Ana

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To learn more connect with Ana Cruz 905.870.0513 or email at ana@askanacruz.ca