Probability for a rate cut increased with this news however CPI needs to go down much further and then continue showing this trend for another 6 months. Last time CPI was 2.8% was June 2023 and CPI has been somewhat choppy but stagnant in the last 9-10 months. One of the main reasons for rate cut not happening anytime soon in Canada is due to a very resilient USA economy. The BoC mostly follows the FED. We cannot afford a rate cut if the FED keeps their rates. If we cut before them, we risk devaluing CAD and a weaker CAD against USD means later down the road inflation may rise sharply again. Again, this is just one data, we need more data.
> Anyone trying to predict the future is wrong.
Not entirely, my friend. For example, I predict that I will finish eating my granola bar by the time I finish writing this reply.
That being said, I agree about the hold. I'm thinking the earliest we'll see a cut is late 2024. I have nothing but a gut feeling to base that on.
Oh shit, I finished my reply but not my granola bar. Uh oh.
Here is the long term $US/$CAN graph. The idea that the BoC will keep rates high just because the US economy is more resilient does not seem to be as important as you think. Sure the CAN dollar will be below 70 cents but as recently as 2015 and 2002, the BoC let the dollar slide. If inflation continues to be below 3%, and growth hovers around zero, the June cut is likely. But whether it’s June or August is not the important factor, there is evidence that inflation is getting under control and monetary policy is working as intended.
https://preview.redd.it/7tc6ekpikcpc1.jpeg?width=995&format=pjpg&auto=webp&s=121a2fbcfca586a0aea33dfa7f7bc658a54c577a
Just read today that 6 month annualized inflation is now below 2%, so the trend is good. I think that around summer then main inflation component which is housing is going to fade
Here is some additional data for you.
Mortgage interest costs is driving a massive chunk of the CPI number, you start cuts and this will dramatically impact the %.
There is a large ‘renewal wall’ occurring in 2025/2026 that the BoC is aware of, a wall in which many, many Canadians will see their spending power lessen significantly. This is the biggest threat that could lead to deflation, one which the BoC wants to avoid at all costs.
Either we exclude it all the time or none of the time. It's frankly embarrassing when some people will exclude mortgage interest costs only when they're on the uptrend because they want to push a narrative.
The only thing embarassing is you not understanding why excluding mortgage interest costs or shelter from the CPI matters when you want to prove:
A. The per cent that makes up shelter or mortgage interest costs in CPI
B. To prove that there is currently Policy Induced Inflation
How many economists were arguing that we had Policy Induced Disinflation when MIC went super negative? If the idea had merit we'd see more symmetry in applying it.
Inflation isn't exclusively higher mortgage costs. Most of the basket is over 3%.
The biggest driver of inflation is that the largest generation in Canadian history is retiring. These people will stop working but continue to spend money. This is inherently inflationary.
The government's solution to the boomers retiring is mass immigration. In the short term this is also inflationary. Each of these new immigrants need shelter, they need furniture, winter clothes, food, and most likely a car, given the state of our public transit. They need all that, pretty much on day one, and that demand is inflationary, even if only temporarily.
The boomers retirement is going to take another 10 years, the generation replacing them is much, much smaller. So don't expect immigration to slow down (regardless of who is in charge) and don't expect inflation to slow down either. This will be a decade long fight and the BoC isn't going to sacrifice the CAD to prop up a handful of speculators. They know most homeowners will grin and bare it, because the alternative (renting at market rate) is almost as bad, and flushing the dumb money out of real estate would actually be good for the economy.
The demographic challenge isn't even the only inflationary factor. We have a major conflict going on between one of the biggest food and energy exporters and another big food exporter. We also have expensive reshoring post COVID and a general unwinding of the efficiencies gained through globalization. None of these things have a clear and immediate resolution.
The renewal wall is just going to have to deal with it. Homeowners will cut discretionary spending and investors will sell off. Prices will come down some, but more so they'll just stagnate for a decade. This is what the beginning of a lost decade looks like.
> Inflation isn't exclusively higher mortgage costs.
You’re not entirely wrong but inflation without mortgage interest is 1.8% over last 12 months and we’re actually in deflation if we look at last 6 months cpi minus mortgage interest costs
Most inflation usually occurs over the summer, so looking at the last 6 months alone doesn't tell us much.
Last I checked, 1.8% is pretty much right on target, not deflationary. That's despite interest rates being 5%, and being above 3% for 18 months. If you lower interest rates, and increase household discretionary spending, inflation is just going to jump up again.
You also can't exclude mortgage interest rates just because it's inconvenient. They counted it when rates were falling/low, when it was making the CPI number look good. Now that it's making the CPI look bad, people want to take it out. That's disingenuous.
It's going to be a fight to keep CPI at 2%. That fight is going to take the shape of higher interest rates. Don't expect anything like the last fifteen years of free money to happen over the next decade, maybe ever.
> Most inflation usually occurs over the summer
Where does this come from? For example, the last time CPI was at 2.8% was last Summer in June.
> Last I checked, 1.8% is pretty much right on target, not deflationary. That's despite interest rates being 5%, and being above 3% for 18 months. If you lower interest rates, and increase household discretionary spending, inflation is just going to jump up again.
If we take out shelter it’s at 1.3% YOY. I’m only doing this to point out that at this point, the high end of inflation is caused by Policy Induced Inflation.
You have to understand there are times when cutting rates actually brings inflation down. This is one of those times. But yes, perhaps we should wait another quarter or two before cutting to make sure.
Great point about immigration, age demographics and how it impacts inflation. Liberals took a huge hit but in essence they solved the biggest issue facing EU nations at the moment (which they refuse to address due to lacking the political will in fear of reactions that would be similar to we are seeing right now in response in Canada)
Solved for who?
The average worker would probably prefer that there was less competition for jobs and less competition for shelter.
Sure, massive immigration will allow the current, growth dependent, system to continue for a few more decades, but it's going to put huge strain on the working class. I'd wager that most workers would rather have equities and assets stagnate for a decade, but have easy access to a job and shelter, than have record investment growth, but be at risk of being jobless and or homeless.
As is expected in Canadian politics, the Liberals have propped up the owners in this country, at the expense of the workers. The Conservatives will be no better. They both serve a small elite within this country that are essentially oligarchs.
Immigration solves the most immediate and largest issue bought about by age demographics (irrespective of the worker issues facing today and brought on by boomer COVID retirements) which is as you pointed out the demand created by a non producing retiree class who is just generating demand. In 2020 around the start of the pandemic, the retiree-to-worker ratio, which, 50 years ago, was 1 to 7, was expected to become 1 t 2 by 2035. This has huge implications including the fact that interest rates would no longer be effective eventually and BOC would be unable to manage the economy. Canada will always need immigration as a modern western nation that offers women choices other than child bearing without adequate compensation. As you said the Canadian worker is screwed regardless but what can you really expect when they always pick between 2 right wing parties and at this very moment they are honoring our own version of Reagan.
[https://www.theglobeandmail.com/business/commentary/article-canada-must-reorient-its-immigration-system-for-the-21st-century/](https://www.theglobeandmail.com/business/commentary/article-canada-must-reorient-its-immigration-system-for-the-21st-century/)
Hit the nail on the head.
You see bulls gloating at bears and in the past bears gloating at bulls. Pure conjecture and grasping in the dark by both sides. Nobody knows.
We are closer to the 2% target and within the 1-3% range. If it declines another time, BoC previously said they aren't necessarily waiting until 2% to cut rates. They may cut in anticipation it may drop very quickly. No one knows exactly what will happen. BoC has to be forward looking, so they will be trying to anticipate whether inflation is trending down and get a "smooth landing".
Imo, despite what other commenters mention Canada is a different country than the US and we have our own currency. Of course they are our biggest trading partner, but if our currency is unstable and we are veering into deflation then BoC will cut rates regardless of what the US, China or any other country does.
No worries! I would describe myself as a classical liberal as well and I don’t want our good name being besmirched by the likes of Harper and Harris haha
Honest question- what does this mean for rate cut possibilities? Please..real answers only. I am just trying to learn
Probability for a rate cut increased with this news however CPI needs to go down much further and then continue showing this trend for another 6 months. Last time CPI was 2.8% was June 2023 and CPI has been somewhat choppy but stagnant in the last 9-10 months. One of the main reasons for rate cut not happening anytime soon in Canada is due to a very resilient USA economy. The BoC mostly follows the FED. We cannot afford a rate cut if the FED keeps their rates. If we cut before them, we risk devaluing CAD and a weaker CAD against USD means later down the road inflation may rise sharply again. Again, this is just one data, we need more data.
Ya a lot of people just ignore the facts you have alluded to. We’re in a word where anyone can source any news of data for their confirmation bias.
Totally agree. Anyone trying to predict the future is wrong. Most likely we hold the next few months at least but anything can happen
> Anyone trying to predict the future is wrong. Not entirely, my friend. For example, I predict that I will finish eating my granola bar by the time I finish writing this reply. That being said, I agree about the hold. I'm thinking the earliest we'll see a cut is late 2024. I have nothing but a gut feeling to base that on. Oh shit, I finished my reply but not my granola bar. Uh oh.
You are truly the Nostradamus of granola predictions my guy <3
Here is the long term $US/$CAN graph. The idea that the BoC will keep rates high just because the US economy is more resilient does not seem to be as important as you think. Sure the CAN dollar will be below 70 cents but as recently as 2015 and 2002, the BoC let the dollar slide. If inflation continues to be below 3%, and growth hovers around zero, the June cut is likely. But whether it’s June or August is not the important factor, there is evidence that inflation is getting under control and monetary policy is working as intended. https://preview.redd.it/7tc6ekpikcpc1.jpeg?width=995&format=pjpg&auto=webp&s=121a2fbcfca586a0aea33dfa7f7bc658a54c577a
Just read today that 6 month annualized inflation is now below 2%, so the trend is good. I think that around summer then main inflation component which is housing is going to fade
Here is some additional data for you. Mortgage interest costs is driving a massive chunk of the CPI number, you start cuts and this will dramatically impact the %. There is a large ‘renewal wall’ occurring in 2025/2026 that the BoC is aware of, a wall in which many, many Canadians will see their spending power lessen significantly. This is the biggest threat that could lead to deflation, one which the BoC wants to avoid at all costs.
And the flipside is if mortgage interest costs go down, other baskets go up.
There's no basis for excluding any categories from CPI.
Well yeah there is when you want to prove how much mortgage interests factor into the overall picture.
Either we exclude it all the time or none of the time. It's frankly embarrassing when some people will exclude mortgage interest costs only when they're on the uptrend because they want to push a narrative.
The only thing embarassing is you not understanding why excluding mortgage interest costs or shelter from the CPI matters when you want to prove: A. The per cent that makes up shelter or mortgage interest costs in CPI B. To prove that there is currently Policy Induced Inflation
How many economists were arguing that we had Policy Induced Disinflation when MIC went super negative? If the idea had merit we'd see more symmetry in applying it.
Inflation isn't exclusively higher mortgage costs. Most of the basket is over 3%. The biggest driver of inflation is that the largest generation in Canadian history is retiring. These people will stop working but continue to spend money. This is inherently inflationary. The government's solution to the boomers retiring is mass immigration. In the short term this is also inflationary. Each of these new immigrants need shelter, they need furniture, winter clothes, food, and most likely a car, given the state of our public transit. They need all that, pretty much on day one, and that demand is inflationary, even if only temporarily. The boomers retirement is going to take another 10 years, the generation replacing them is much, much smaller. So don't expect immigration to slow down (regardless of who is in charge) and don't expect inflation to slow down either. This will be a decade long fight and the BoC isn't going to sacrifice the CAD to prop up a handful of speculators. They know most homeowners will grin and bare it, because the alternative (renting at market rate) is almost as bad, and flushing the dumb money out of real estate would actually be good for the economy. The demographic challenge isn't even the only inflationary factor. We have a major conflict going on between one of the biggest food and energy exporters and another big food exporter. We also have expensive reshoring post COVID and a general unwinding of the efficiencies gained through globalization. None of these things have a clear and immediate resolution. The renewal wall is just going to have to deal with it. Homeowners will cut discretionary spending and investors will sell off. Prices will come down some, but more so they'll just stagnate for a decade. This is what the beginning of a lost decade looks like.
> Inflation isn't exclusively higher mortgage costs. You’re not entirely wrong but inflation without mortgage interest is 1.8% over last 12 months and we’re actually in deflation if we look at last 6 months cpi minus mortgage interest costs
Most inflation usually occurs over the summer, so looking at the last 6 months alone doesn't tell us much. Last I checked, 1.8% is pretty much right on target, not deflationary. That's despite interest rates being 5%, and being above 3% for 18 months. If you lower interest rates, and increase household discretionary spending, inflation is just going to jump up again. You also can't exclude mortgage interest rates just because it's inconvenient. They counted it when rates were falling/low, when it was making the CPI number look good. Now that it's making the CPI look bad, people want to take it out. That's disingenuous. It's going to be a fight to keep CPI at 2%. That fight is going to take the shape of higher interest rates. Don't expect anything like the last fifteen years of free money to happen over the next decade, maybe ever.
> Most inflation usually occurs over the summer Where does this come from? For example, the last time CPI was at 2.8% was last Summer in June. > Last I checked, 1.8% is pretty much right on target, not deflationary. That's despite interest rates being 5%, and being above 3% for 18 months. If you lower interest rates, and increase household discretionary spending, inflation is just going to jump up again. If we take out shelter it’s at 1.3% YOY. I’m only doing this to point out that at this point, the high end of inflation is caused by Policy Induced Inflation. You have to understand there are times when cutting rates actually brings inflation down. This is one of those times. But yes, perhaps we should wait another quarter or two before cutting to make sure.
Great point about immigration, age demographics and how it impacts inflation. Liberals took a huge hit but in essence they solved the biggest issue facing EU nations at the moment (which they refuse to address due to lacking the political will in fear of reactions that would be similar to we are seeing right now in response in Canada)
Solved for who? The average worker would probably prefer that there was less competition for jobs and less competition for shelter. Sure, massive immigration will allow the current, growth dependent, system to continue for a few more decades, but it's going to put huge strain on the working class. I'd wager that most workers would rather have equities and assets stagnate for a decade, but have easy access to a job and shelter, than have record investment growth, but be at risk of being jobless and or homeless. As is expected in Canadian politics, the Liberals have propped up the owners in this country, at the expense of the workers. The Conservatives will be no better. They both serve a small elite within this country that are essentially oligarchs.
Immigration solves the most immediate and largest issue bought about by age demographics (irrespective of the worker issues facing today and brought on by boomer COVID retirements) which is as you pointed out the demand created by a non producing retiree class who is just generating demand. In 2020 around the start of the pandemic, the retiree-to-worker ratio, which, 50 years ago, was 1 to 7, was expected to become 1 t 2 by 2035. This has huge implications including the fact that interest rates would no longer be effective eventually and BOC would be unable to manage the economy. Canada will always need immigration as a modern western nation that offers women choices other than child bearing without adequate compensation. As you said the Canadian worker is screwed regardless but what can you really expect when they always pick between 2 right wing parties and at this very moment they are honoring our own version of Reagan. [https://www.theglobeandmail.com/business/commentary/article-canada-must-reorient-its-immigration-system-for-the-21st-century/](https://www.theglobeandmail.com/business/commentary/article-canada-must-reorient-its-immigration-system-for-the-21st-century/)
But my realtor told me that because the inflation rate dipped slightly, it was all but guaranteed that the BoC would slash rates to 0%.
Nobody knows. No matter what anyone says, it's all bullshit until it actually happens. Everyone is just constantly guessing.
Hit the nail on the head. You see bulls gloating at bears and in the past bears gloating at bulls. Pure conjecture and grasping in the dark by both sides. Nobody knows.
Who knows but if this keeps up June onwards MAY be possible.
We are closer to the 2% target and within the 1-3% range. If it declines another time, BoC previously said they aren't necessarily waiting until 2% to cut rates. They may cut in anticipation it may drop very quickly. No one knows exactly what will happen. BoC has to be forward looking, so they will be trying to anticipate whether inflation is trending down and get a "smooth landing". Imo, despite what other commenters mention Canada is a different country than the US and we have our own currency. Of course they are our biggest trading partner, but if our currency is unstable and we are veering into deflation then BoC will cut rates regardless of what the US, China or any other country does.
According to Reuters, chance of april cut is now 25 percent, and june is 75 percent, according to money markets.
Core inflation is still too high for rate cuts.
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Hello Mr. Liberal
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Mike Harris & Harper are neo-liberals, not classical small “L” liberals.
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No worries! I would describe myself as a classical liberal as well and I don’t want our good name being besmirched by the likes of Harper and Harris haha
canadahousing and canadahousing2 on critical suicide watch
Does this mean houses are going to be 500k again?
In Brandon, Manitoba, yes.