Canadian CPI Inflation Edged Upward in January Owing To Rising Energy Prices

General Angela Calla 24 Mar

Canadian Inflation Edged Upward to 1.9% Y/Y in January

 

In January, the Consumer Price Index (CPI) rose by 1.9% year over year (y/y), up from 1.8% in December. This rise was primarily due to an uptick in energy prices. Excluding gasoline, the CPI increased by 1.7% in January, down from 1.8% in December.

Higher energy prices, particularly gasoline and natural gas were the main contributors to this acceleration. However, these increases were somewhat countered by continued downward pressure on prices for items affected by the goods and services tax (GST)/harmonized sales tax (HST) break implemented in December. Notably, food prices fell by 0.6% year-over-year in January, marking the first annual decline since May 2017. This decrease was primarily driven by a significant drop in prices for food purchased from restaurants, which fell by 5.1%.

The CPI rose by 0.1% in January, compared to a 0.4% decline in December.

Energy prices rose 5.3% in January y/y, following a 1.0% increase in December. Specifically, gas prices increased 8.6% yearly in January, up from 3.5% in December. In Manitoba, gas prices rose by 25.9% due to the reintroduction of a provincial gas tax at a lower rate after its temporary suspension from January to December 2024.

Additionally, prices for new passenger vehicles increased by 2.3% year-over-year in January, compared to a 0.9% increase in December. In contrast, prices for used vehicles continued to decline in January, decreasing by 3.4%, although slower than the 4.1% decline observed in December. This marks the 13th consecutive month of year-over-year price decreases for used vehicles.
In January 2025, prices for food purchased from restaurants decreased by 5.1%. This decline was over three times greater than the previous record drop of 1.6% observed in December 2024.

Canadians also experienced lower prices for alcoholic beverages purchased from stores, which fell by 3.6% in January 2025 compared to January of the previous year, following a decrease of 1.3% in December.

Additionally, prices for toys, games (excluding video games), and hobby supplies dropped by 6.8% year over year in January after a decline of 7.2% in December.

Excluding indirect tax changes, inflation notably increased to 2.6% from 2.2% the prior month and a recent low of 1.5% last September. It was a similar story for core inflation—BoC’s main measures rose 0.2% m/m in adjusted terms, lifting both to 2.7% y/y (from 2.5% for trim and 2.6% for median). Over the past three months, both have risen at just over a 3% annualized pace, or just a touch above the BoC’s comfort zone. The Bank’s old CPIX measure of core, which removes eight volatile items and sales taxes, perked up to a 2.1% y/y pace but remains mild. Similarly, the breadth of prices rising above 3% is close to normal.

It’s a little less flashy, but more importantly, shelter inflation continues to grind down gradually. Rents posted their first monthly decline in more than two years (-0.1%), calming the annual increase to 6.3% (from 7.1% last month and a peak of 9% last spring). Mortgage interest costs eased to 10.2% y/y from 11.7% in December and the plus-30% pace in 2023. Offsetting those milder trends were big pick-ups in many utility charges.
Bottom Line

Traders in overnight swaps have reduced their expectations for a quarter-percentage point rate cut by the Bank of Canada at its next meeting on March 12, lowering the odds to just over one-third, down from a nearly even chance last week.

Bank of Canada Governor Tiff Macklem has successfully brought inflation under control. However, an impending tariff war between the U.S. and Canada poses a new threat to his efforts to maintain price stability.

Policymakers eased up on the pace of rate cuts in January after aggressively lowering borrowing costs last year, but they remain uncertain about the future direction. U.S. President Donald Trump has indicated plans to impose tariffs of up to 25% on Canadian goods in March, while Prime Minister Justin Trudeau’s government has promised to retaliate. A tariff war would likely compel the central bank to adjust its rate-cutting strategy to prepare the economy for the potential impact of tariffs on consumer prices.

The central bank will next determine the benchmark overnight rate on March 12. Economists are divided into two viewpoints: some anticipate further rate cuts, while others expect the bank to pause amid increasing uncertainties. Governor Tiff Macklem has expressed a desire to bolster economic growth and expects inflation to remain close to the 2% target in the coming months, influenced by fluctuations in global energy prices. Currently, the odds favor another 25 basis points rate cut in March.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Canadian GDP Growth Accelerated in Q4 to 2.6% Compared to an Upwardly Revised 2.2% in Q3

General Angela Calla 24 Mar

Canada Finished 2024 on a Stronger Note, But Tariffs Remain a Concern

This morning, Statistics Canada released the GDP data for the final quarter of last year, showing a stronger-than-expected increase in household final consumption spending, exports, and business investment. However, drawdowns of business inventories and higher imports tempered the overall growth.

In Q4, the Canadian economy accelerated, with real GDP growth reaching a solid 2.6% annualized, which was well above consensus and the Bank of Canada’s latest forecast. The growth was broad-based, led by a 5.6% increase in consumer spending. Consumer spending climbed 3.6% annually for three of the four quarters in 2024, supported by rate cuts in the second half of the year. Year-over-year, consumer outlays rose by 3.6%, marking the best pace since 2018 (excluding the pandemic). Although the tax holiday had a positive impact, it took effect very late in the quarter, suggesting that momentum was already strong before that. The housing sector also showed solid growth, increasing by 16.7%, the best gain in nearly four years, driven by a significant rise in resale activity. Business investment also contributed positively, rising by 8% due to investment in machinery and equipment.

However, inventories were a significant drag on growth, subtracting 3.3 percentage points, while net exports added 0.6 percentage points. Final domestic demand growth was recorded at 5.6%, the best quarter since 2017, excluding the pandemic. Notably, the growth figures for Q2 and Q3 were revised upward: Q2 is now at 2.8% (previously 2.2%), and Q3 is now at 2.2% (previously 1.0%).

December’s GDP came in slightly below expectations at +0.2%. Retail sales significantly contributed to this gain, increasing by 2.6% due to the tax holiday, while utilities also experienced a notable increase of 4.7% owing to more typical winter weather. The January flash estimate showed a solid rise of +0.3%, likely reflecting activity that was front-loaded ahead of potential tariffs. Nonetheless, this indicates a promising start to Q1 and 2025.

Bottom Line

The Canadian economy demonstrated strong momentum in the latter half of 2024, driven by aggressive rate cuts from the Bank of Canada that stimulated economic activity. The growth rate significantly exceeded the central bank’s forecast, coming in at 2.6% compared to the expected 1.8%. Overall growth for 2024 was also better than anticipated, at 1.5% versus the forecasted 1.3%. However, much of this growth occurred before the escalation of tariff threats.

This data may support the central bank’s decision to pause its easing cycle at the upcoming meeting on March 12. However, looming tariff threats from U.S. President Donald Trump, including a 10% tariff on Canadian energy and a 25% tariff on all other goods set to take effect on Tuesday, could complicate the bank’s decision-making.

The threat of tariffs may also account for the muted market reaction to the positive GDP report, which coincided with a U.S. report showing that the Federal Reserve’s preferred inflation gauge rose at a mild pace while consumer spending declined. On the day, Canadian government two-year bond yields fell by less than one basis point to 2.619% as of 9:10 a.m. in Ottawa, while the Canadian dollar slipped slightly, down less than 0.1% to C$1.4426 per U.S. dollar. Traders in overnight swaps assessed the odds of a rate cut on March 12 at about 43%, compared to a near 50% chance just a day earlier.

Article courtesy of Dr. Sherry Cooper, Chief Economist, DLC

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Canadian Inflation Jumped to 2.6% y/y in February As GST Tax Holiday Ended

General Angela Calla 21 Mar

Canadian Inflation Surged to 2.6% in February, Much Stronger Than Expected

The Consumer Price Index (CPI) rose 2.6% year-over-year (y/y) in February, following an increase of 1.9% in January. With the federal tax break ending on February 15, the GST and HST were reapplied to eligible products. This put upward pressure on consumer prices for those items, as taxes paid by consumers are included in the CPI.

While the second straight acceleration in the headline number was expected, the pace of price gains may still surprise Bank of Canada policymakers, who cut interest rates for the seventh straight meeting. Donald Trump’s tariff threats hamper business and consumer spending. But assuming the federal sales tax break hadn’t been in place, Canadian inflation would have jumped even higher to 3% in February. This is at the upper bound of the bank’s target range, from 2.7% a month earlier. Canadian inflation has not been at or above 3% since the end of 2023.

Faster price growth was broad-based in February, the end of the goods and services tax (GST)/harmonized sales tax (HST) break through the month contributed notable upward pressure to prices for eligible products. Slower growth for gasoline prices (+5.1%) moderated the all-items CPI acceleration.

The CPI rose 1.1% m/m in February and 0.7% on a seasonally adjusted basis.  However, the increase exceeded the tax impact as seasonally-adjusted CPI excluding the tax impact was +0.4%. And, in case you want to pin it on food & energy, CPI excluding food, energy & taxes was +0.3%.

Gains were across the board, with the sectors impacted by the tax change seeing the most significant increase: recreation +3.4%, food +1.9%, clothing +1.6%, and alcohol +1.5% more to come next month, with the tax holiday only ending in mid-February. The headline inflation figures are subject to as much noise as we’ve seen in decades. They are poised to continue for at least another couple of months, making it very challenging to interpret the inflation data.

As a result, prices for food purchased from restaurants declined at a slower pace year over year in February (-1.4%) compared with January (-5.1%). Restaurant food prices contributed the most to the acceleration in the all-items CPI in February.

Similarly, on a yearly basis, alcoholic beverages purchased from stores declined 1.4% in February, following a 3.6% decline in January.

On a year-over-year basis, gasoline prices decelerated, with a 5.1% increase in February following an 8.6% gain in January. Prices rose less month over month in February 2025 compared with February 2024, when higher global crude oil prices pushed up gasoline prices, leading to slower year-over-year price growth in February 2025.

Month over month, gasoline prices rose 0.6% in February. This increase was primarily related to higher refining costs amid planned refinery maintenance across North America. This offset lower crude oil prices, mainly due to increased American supply and tariff threats, contributing to slowing global growth concerns.

One notable exception to the broad-based strength was shelter, rising “just” 0.2%. That’s the smallest gain in five months, trimming the yearly pace to 4.2%, the slowest since 2021, with more downside to come. Mortgage interest costs rose a modest 0.2% for a second straight month, slicing it to +9% y/y, ending a 2½-year run of double-digit increases.

Not surprisingly, the core inflation metrics were firm as well. CPI-Trim and Median both rose 0.3% m/m and 2.9% y/y. The 3- and 6-month annualized rates are all above 3% as well, pointing to ongoing stickiness. The breadth of inflation, which has been a focus for the Bank of Canada, also worsened with the share of items rising 3%+ increasing modestly. None of this is encouraging news for policymakers.

Bottom Line

This report will reinforce the Bank of Canada’s cautious stance on easing to mitigate the impact of tariffs. Notably, the upcoming end of the carbon tax will cause inflation to drop sharply in April. However, March may see an increase in inflation as the effects of the tax holiday begin to reverse. There is still a lot of uncertainty surrounding inflation, which complicates the job of policymakers. We will see what April 2 brings regarding additional tariffs.

If the economic outlook did not worsen, the Bank of Canada might consider pausing after cutting rates at seven consecutive meetings. However, the Canadian economy will likely slow significantly in the coming months.

Bank of Canada Governor Tiff Macklem said last week the bank would “”roceed carefully””amid the tariff war. Economists are still awaiting more clarity on tariffs before firming up their expectations for the next rate decision on April 16, when policymakers will also update their forecasts. Right now, traders are betting that the BoC will hold rates steady in April, but a lot can and will happen before then.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

March 2025 Newsletter

General Angela Calla 18 Mar

As the Spring season approaches, I have some updates for how to prepare your finances for the coming homebuying season. Plus, check out my fraud awareness tips as March is Fraud Awareness Month!

Spring Forward: Preparing Your Finances for the Home-Buying Season

Spring is one of the busiest seasons in the real estate market, with buyers eager to find their dream home before summer.

If you’re planning to purchase a home in Spring 2025, now is the time to get your finances in order.

Being financially prepared can help you secure a mortgage with favorable terms and make your home-buying journey smoother. Here’s how to get ready:

1. Check and Strengthen Your Credit Score

Your credit score is one of the most important factors in mortgage approval, influencing both your eligibility and the interest rate you’ll receive. A higher score can save you thousands over the life of your mortgage, so it’s worth taking the time to improve it.

  • Start by checking your credit report for errors, and if you spot any inaccuracies, dispute them immediately.
  • Pay down outstanding debts to lower your credit utilization ratio, which plays a big role in your score.
  • Avoid opening new lines of credit in the months leading up to your mortgage application, as this can temporarily lower your score.
  • By reaching out to me, I can help preserve your credit score as they will pull your credit report once to shop your application. Note: Multiple credit checks in a short period can lower your credit score.

2. Build a Strong Down Payment

The more you can put down up front, the better. A larger down payment can reduce your monthly mortgage costs, give you access to better loan terms, and, in some cases, eliminate the need for mortgage insurance.

  • Set a savings goal based on home prices in your target area so you have a clear plan.
  • Explore first-time homebuyer programs that offer down payment assistance—there are plenty of government and lender-based options.
  • Make saving a habit by automating deposits into a dedicated home savings account.
  • Avoid moving your money around to multiple accounts prior to applying for your mortgage. Lenders require a 90-day history of your down payment and a history of moving your money around can make this more difficult to easily verify your down payment.

3. Reduce Your Debt-to-Income Ratio (DTI)

Lenders use your debt-to-income ratio (DTI), aka GDS/TDS, to assess how comfortably you can handle a mortgage payment on top of your existing obligations. A lower DTI signals financial stability, improves your chances of loan approval and can expand your borrowing power.

  • Work on paying off high-interest debts or debts with high monthly payments, like credit cards and personal loans, to free up more of your income.
  • Hold off on making large purchases or taking on new loans, such as car financing, before applying for a mortgage.
  • If possible, look for ways to increase your income—whether through a raise, side gig, or freelance work—to strengthen your financial standing. Note self employed income or part time non guaranteed hours employment generally require a 2-year history.

4. Get Pre-Approved for a Mortgage

A mortgage pre-approval is a game-changer in a competitive market. It gives you a clear budget, shows sellers that you’re a serious buyer, and can even speed up the closing process.

  • Start gathering essential documents like tax returns, pay stubs, and bank statements—lenders and myself will need these to assess your financial health.
  • Reach out to me today for information to help you compare mortgage rates and terms, ensuring you get the best deal.
  • Take time to discuss your mortgage options with me, from fixed to variable rates, different term lengths, or special programs available to you.
  • Download my mobile mortgage app.

5. Budget for Additional Costs

The home price isn’t the only expense you’ll need to plan for. Homeownership comes with extra costs that can catch buyers off guard if they’re not prepared.

  • Closing costs typically range from 1.5% to 4% of the home’s purchase price, covering legal fees, land transfer taxes, and more. This is money you need on top of your down payment
  • Property taxes, Condo fees and homeowners’ insurance can add to your monthly expenses—make sure to factor them into your budget.
  • Set aside a fund for home maintenance and emergency repairs to avoid financial strain when unexpected expenses arise.

6. Research the Housing Market

Spring is a competitive time to buy, so being well-informed about the market can give you an edge.

  • Keep an eye on housing prices in your preferred neighborhoods to understand trends and pricing expectations.
  • Stay updated on current interest rates, as they directly impact affordability and your monthly payments.
  • Work with a trusted real estate agent who can help you navigate bidding wars, negotiate offers, and find the right home for your needs.

7. Consider Locking in an Interest Rate

Interest rates can fluctuate, and even a small increase can affect your monthly payments. If rates are expected to rise, securing a lower rate in advance could save you money over time.

  • Ask me about rate lock options and how long they’re valid for. Rate holds on average are valid for 120 days before they expire and a new rate hold period is requested
  • Compare fixed and variable rates to see which aligns best with your financial goals.
  • Keep an eye on Bank of Canada rate announcements and economic trends that could impact mortgage rates. Note: With recent Bank of Canada announcements variable rates which are tied to Prime are dropping.

Taking these steps now will set you up for success. The more financially prepared you are, the smoother the process will be—and the better your chances of landing your dream home at the right price.

Fraud Awareness Month: Scams to Avoid

Did you know? March is Fraud Awareness Month, making it the perfect time to learn how to protect yourself and your mortgage from fraud.

Understanding common mortgage scams and how to recognize warning signs can make all the difference in safeguarding your financial well-being.

Common Mortgage Fraud Scams

One of the most frequent types of mortgage fraud involves a fraudster acquiring a property and artificially inflating its value through a series of sales and resales. They then secure a mortgage based on the inflated price, leaving lenders and buyers at risk.

Red Flags to Watch For

Be cautious if you encounter any of the following:

  • Someone offers you money to use your name and credit to obtain a mortgage
  • You’re encouraged to provide false information on a mortgage application
  • You’re asked to leave signature lines or other sections of your mortgage application blank
  • A seller or investment advisor discourages you from inspecting the property before purchase
  • The seller or developer offers a rebate on closing that isn’t disclosed to your lender

Title Fraud: A Costly Scam

Another major concern is title fraud, which is a form of identity theft. This occurs when a fraudster, using false identification, forges documents to transfer your property into their name. They then take out a new mortgage on your home, collect the funds, and disappear—leaving you to deal with the consequences when your lender starts foreclosure proceedings.

How to Protect Yourself from Title Fraud

  • Always visit the property you’re purchasing in person.
  • Compare local listings to ensure the asking price is reasonable.
  • Work with a licensed real estate agent.
  • Be cautious of realtors or mortgage professionals with a financial stake in the deal.
  • Request a copy of the land title or conduct a historical title search.
  • Include a professional appraisal in the offer to purchase.
  • Require a home inspection to check for hidden issues.
  • Ask for receipts for recent renovations to verify legitimacy.
  • Ensure your deposit is held in trust for added security.
  • Consider title insurance—the best time to get it is before fraud occurs, not after.

Stay Vigilant and Take Action

Fraud can have devastating financial consequences, but staying proactive and informed is your best defense. If you suspect fraudulent activity, act quickly—report it to the authorities and take steps to protect your assets.

Knowledge is power, and by staying alert, you can keep your mortgage and finances secure.

Monitoring your credit report can also help stay ahead of any fraud activity pertaining to identity theft!

Economic Insights from Dr. Sherry Cooper

The outlook for the Canadian economy in the coming months presents a picture of cautious optimism with high uncertainty.  Economic indicators were expected to strengthen this year, driven by resilient consumer spending and a robust export sector.  Housing activity was poised to accelerate this year as well.

However, when the newly inaugurated US president began to threaten Canada with 25% tariffs at the end of January, home sales slowed markedly. However, challenges such as global market volatility and inflationary pressures could temper this growth.

The Bank of Canada will maintain its current monetary policy stance, carefully balancing interest rates to manage inflation while supporting economic activity. The housing market remains a key area of focus, with efforts to address affordability and supply constraints continuing to be critical. Immigration is slated to slow this year, particularly for non-permanent residents, which will ease the housing shortage. Rents have fallen sharply in recent months.

Rising costs, labour shortages, and potential import tariffs on building materials could hinder construction activity.

Tariff threats are real and unnerving. Exports account for roughly a third of Canadian economic activity. Canada sends 75% of its exports to the US,   led by energy, automobiles, and metals. Threatened attacks on these trade flows might initially spill into higher prices. Still, the primary impact would be to slow economic activity and increase unemployment, already at 6.6%, up from a cycle low of 4.8% in July 2022. In contrast, the US jobless rate is a mere 4.0% and GDP growth is a lot stronger than in Canada despite double the central bank rate cuts than south of the border.

In the event of a trade war, interest rates are more likely to fall as the BoC attempts to backstop the economy. This would decrease mortgage rates, with floating rates falling more than fixed-rate loans. About 1.2 million mortgages will renew this year, most of them at a higher rate, said real estate company Royal LePage in a report out this morning.

Almost 30% of those homeowners said they would choose a variable rate on renewal, up from 24% now on a floating rate. Sixty-six percent said they would renew on a fixed-rate loan, down from 75% now locked in.

Of those who expect their monthly mortgage payment to rise upon renewal this year, 81% said the increase would put a financial strain on their household.

There remains a good chance that Canada could avert a trade war. We’ve already taken action to tighten our border. The US could not easily replace the oil, hydroelectricity power, autos or aluminum it purchases from Canada. We are the largest export market for US products. Excluding oil exports, the US has a trade surplus with Canada. Revisions to the US, Canada, and Mexico trade deal, slated for next year, could be accelerated. The US has much bigger fish to fry than trade concerns with Canada.

On balance, interest rates are likely to fall further. Government actions to improve housing affordability and pent-up housing demand bode well for a housing revival this year. Canadian inflation is under control at about 2%, boosting the chances of additional rate cuts this year.

 

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Bank of Canada Cuts Policy Rate By 25 BPs

General Angela Calla 18 Mar

The Bank of Canada (BoC) reduced the overnight rate by 25 basis points this morning, bringing the policy rate down to 2.75%, within the neutral range of 2.25%—2.75%. Tariff tremors have already led to a decline in consumer confidence and spending, a weakening labour market, and a decline in business investment. Compound that with falling population growth, and you see why the Governing Council took the overnight rate down again even though they state that monetary policy cannot offset the impacts of a trade war.

Trade wars lead to higher prices and slower growth. The rise in prices causes consumers to tighten their belts, concerned about the impact of tariffs on their income and investments. Today, there is a 25% tariff on steel and aluminum exports to the US. This impacts Canada the most as it supplies roughly 80% of US aluminum demand. The EU introduced retaliatory tariffs on US goods in response. Canada added to its retaliation. Recent data suggest the US economy is slowing.

Monetary policy remains restrictive as the real overnight rate (2.75% minus the headline inflation rate) is 85 bps, up from the historical average of 60 bps. Five-year Government of Canada bond yields increased on the news to 2.65% compared to 4.05% in the US. The Federal Reserve is not expected to cut rates when it meets again this month.

Despite relatively strong GDP growth in Canada in the second half of last year, home sales and hiring began to slow in late January due to tariff threats, and more tariffs are yet to come. On March 20, China is expected to impose 100% retaliatory tariffs on Canadian canola oil, while pork and seafood will face a 25% levy. The Chinese tariffs are a push-back against Canada for imposing a 100% levy on electric cars from China and  25% on steel and aluminum.

On April 2, the US announced it will impose reciprocal tariffs on nations that have levied tariffs on US goods. President Trump has also said he is considering imposing retaliatory tariffs on Canadian dairy and lumber.

“We’re now facing a new crisis. The economic impact could be severe depending on the extent and duration of new US tariffs,” Macklem said in his prepared remarks.

Macklem called the uncertainty of the tariff dispute “pervasive” and said that it was “already causing harm.” Officials said the “continuously changing” US tariff threat was hitting consumers’ spending intentions and limiting businesses’ plans to hire and invest.

At the same time, Macklem said the bank “will proceed carefully with any further changes” to borrowing costs, and officials would “need to assess both the upward pressures on inflation from higher costs and the downward pressures from weaker demand.”

Bottom Line

These are uncertain times. The US is determined to impose worldwide tariffs, disproportionately hitting Canada, Mexico, and China, the US’s top trading partners. This is a misguided neo-Mercantilist policy. Mercantilism assumes that the global economic pie is fixed, so if one country prospers, another must fail. This idea of a zero-sum game was debunked in the 18th century by Adam Smith and others who showed that if countries have a competitive advantage in various products and services, all are better off by producing and trading those products with the rest of the world. It is not a zero-sum game. The economic pie grows with trade. This was the idea behind globalization and the USMCA free trade agreement.

Given Canada’s vulnerability to tariffs, the economy will suffer more than the US, which has a relatively closed economy (where exports are a small proportion of GDP). Prices will rise depending on the duration and size of the coming tariffs, but mitigating the inflation will be the weakness in economic activity. Stagflation, a buzz-word in the 1970s, is back in the lexicon. We expect the BoC to continue cutting the policy rate in 25-bps increments until it reaches 2.25% this June, triggering a rebound in home sales. Layoffs and spending cuts will dampen sentiment, but lower interest rates will bring buyers off the sidelines.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Bank of Canada Lowers Policy Rate – What It Means for You

General Angela Calla 12 Mar

Bank of Canada reduced its policy interest rate by 25 basis points. Read the full press release HERE. Most Bank’s Prime rate will reduce to 4.95%.

What This Means for You:

Variable-Rate Mortgage Holders: Expect lower interest costs
Adjustable-Rate Mortgage Holders: reduced monthly payments, approximately $13/month for every $100k in balance
Fixed-Rate Mortgage Holders: fixed rates are influenced by bond markets, this cut does not reduce fixed rates by 25 basis points.
Homebuyers: Lower rates improve affordability, but demand may increase, impacting home prices.
Want to Learn More?

We’re hosting two upcoming FREE webinars to help you navigate these changes:

Mortgage Renewals – March 19 – sign up HERE

Home Buyers – April 9 – sign up HERE

If you have questions or want personalized advice, feel free to reach out or register for a webinar. We’re here to help!

Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog.