01/25/2024
Big news from the Bank of Canada! 🇨🇦💰 They didn’t just pump the brakes on rate hikes yesterday; they threw the car into park.
Senior Deputy Governor Carolyn Rogers shared the scoop that the Bank is now confident about inflation, shifting focus to “how long” rates stay put at 5%.
Governor Tiff Macklem emphasized letting the higher interest rates work their magic, but the real question is: When will the high-rate show take its bow and exit the stage to make way for cuts? Historical hints say it could be anywhere from a few months to over a year! Meanwhile, the forward market is buzzing with predictions.
Before yesterday, traders bet on four Bank of Canada rate drops by the end of the year, with the first starting in June. Not much has changed post-announcement but our 5-year bond yields rose 5 bps after the Bank’s statement. 📈 Eyes are now on the upcoming CPI report on Feb. 20, and USA’s GDP and PCE data today and tomorrow!
Macklem reminds us to focus on Canadian GDP, which took a hit in 2023. What’s part of the reason? Canadian consumers are tightening their spending, which is key. 🛒💰
On the housing front, mortgage rates are a wildcard, boosting inflation. The Bank acknowledges the challenge but hints at looking through it to focus on the bigger picture. 🏡💡 Keep an eye on monthly CPI numbers for the real inflation journey.
Of course, an assortment of risks could sway inflation. But the current buzz? Economic deterioration might kick off a rate-cut cycle this year.
For borrowers where financial stability is a concern, a more secure option might be found in a 2 to 3-year fixed term or hybrid model, rather than taking on the unpredictable variable rate.
Stay tuned, folks! The 2024 financial journey is just beginning! 🌐💼
