Bank of Canada Update March – No Change

Good morning,  For the first time in 12 months the Bank of Canada has NOT raised rates.  They signalled a pause after the Jan meeting & held true today but it’s continued to be a really flippy floppy few months.  Leading into Christmas bond yields were dropping & fixed rates were coming down.  That reversed hard into the new year then returned to dropping below pre-Christmas levels.  Enter Feb & another about face with upward pressure on rates & that’s where we still sit today.  Over that time the market went from pricing in no more hikes with rates to start dropping late 2023 to then pricing in a potential hike before the fall with the Bank of Canada not dropping until 2024. Part of the reason for the spike was job gains.  Canada added 150k jobs in Jan which was 10 times the estimate, however that was driven by temporary, non permanent resident, non citizen workers to fill the large gap of job vacancies.  The interpretation there is that is likely a 1 time boom & not something to read in to deeply on.  It’s also important to note that when the economy slows, those temporary workers tend to go back to their home countries so not the best foundation for a robust growing economy. So Tiff has signalled a pause.  What is the risk that could cause them to raise again?  Inflation & the US FED. On the inflation front, the good news there it came in softer than expected at 5.9% vs 6.1% expected & down from 6.3% in Dec.  Food prices are still high at 10.4% year over year but who really eats food anyways..

The US Fed has recently upped their hawkishness & suggested a potential 50bps hike this month which could lead to a higher terminal rate then previously expected, put pressure on the loonie & pressure the Bank of Canada to take further action.  Takeaways from today are that things are taking longer to play out.  Still a lot of volatility with rates & the outlook continues to bounce around.  At this point it’s looking like for the Bank of Canada to cut this year we would need a significant economic downturn but as of now it’s looking like no rate cuts until next year.  If you have a mortgage coming up for renewal this year get in touch with me today.  It never hurts to get some rate holds in & have some irons in the fire as we see how the upcoming months play out.  That’s it for me.  Thanks for watching & have a great day!