Here are the highlights:

• Interest Rate Cut:
  • Bank of Canada cut interest rates by 0.25%, lowering Prime Rate from 5.2% to 4.95%, the seventh consecutive cut.
  • This brings the total rate cuts to -2.25% since June.
    
• Economic Indicators:
  • inflation up in Jan from 1.8% to 1.9%
  • inflation expected to uptick to 2.5% in March as reverse effects of GST break take effect
  • ​Trade conflict could lead to weaker GDP & higher prices
    
• Job Market:
  • Feb report was weak with no job growth
  • Unemployment holds at 6.6%
    
• Forecasts:
  • 5 of the 6 Big Banks forecast further rate cuts in 2025 (tariffs aside):
    • 0.25% – 0.75%
      
• Next Bank of Canada Meeting:
  • Scheduled for April 16th, 2025

The Bank of Canada has cut interest rates for the 7^th consecutive meeting, bringing down Prime from 5.2% to 4.95% & lowering all variable rate mortgages & lines of credit.  This brings the total number of cuts to 2.25% since they started in June.  Will we get more?

If you ask the big bank economists, the majority say yes, and if the trade war hangs around, we could more than expected.

And so why is that?  Don’t tariffs raise prices & inflation?  Isn’t that what the Bank of Canada was fighting so hard to fix?

Tariffs can certainly impact prices as the cost of imported goods & raw materials goes up, competition gets reduced & supply chains get disrupted.  The 2018 tariff war between the US & China impacted US inflation by the tune of 0.5%.

The bigger concern here at home, though, is the potential impact on growth. Canada has been dealing with a productivity crisis.  To fix that you need business investment & if you’re a business, you’re probably looking to take risk off the table right now & NOT make any major investments.  You’re probably concerned about the impact to consumer spending so are looking to cut costs right now & that can mean job losses, weaker GDP.

If the trade war sticks, our per capita recession will likely turn to AT LEAST a mild overall recession.  Recent falling equity prices & bond yields reflects that expectation.  The looming threat alone will result in weaker North American growth.

So yes, tariffs can lead to higher prices but the bigger concern is a recession, which would lead to lower rates.

That’s it for today.  If you or any friends or family have a mortgage coming up for renewal this year please get in touch so we can make sure you aren’t missing out on any opportunities.