Canadians got a little relief after facing one of the most aggressive rate hikes in history. At the January meeting, the Bank of Canada (BoC) announced a “conditional pause” on further hikes. That leaves one big question that everyone is trying to figure out—what conditions could trigger further rate hikes?
Bank of Canada Is Worried About Excess Demand
The pause is conditional on excess demand tapering, explained BMO Capital Markets. “From an activity perspective, the Bank has made it clear that the economy is running with excess demand, contributing to inflation pressure,” explained Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO.
It all boils down to any factors that may contribute to excess demand, and spark further inflation. Reitzes sees GDP growth or employment running too hot, as potential warnings. The BoC is currently expecting Q1 GDP to come in flat, with anything higher potentially sparking a path to further hikes, according to the bank.
They’re also watching employment, which has been fueling US growth but has been tepid in Canada. “We’ll get the February employment figures a couple of days after the BoC announcement, and policymakers will be watching closely for signs of ongoing strength that could fuel wage gains and, in turn, inflation,” said Reitzes.
US Inflation Might Spark Higher Rates In Canada
Inflation is still going to be front and center, but he sees the BoC looking at short-term trends. The 3-month annualized growth rate is likely to be in focus, according to Reitzes. They’ll be sensitive to any signs of acceleration, or deceleration. Countries like the US are facing reemerging inflation pressures, and any rate hikes in excess of Canada can spark inflation via a weak loonie.
“The risks remain heavily tilted toward higher inflation, which will keep the BoC’s finger on the rate hike trigger through at least midyear,” said Reitzes.
Bank of Canada Unlikely To Hike This Month
That’s great, but what the heck does that mean? BMO doesn’t see the BoC hiking rates this month, since that would be silly to reverse course after one month. March is also a “mini” announcement, where they don’t publish a full accompanying report. These meetings don’t typically see the central bank change course, since they aren’t providing detailed notes for the public.
Though Reitzes sees the BoC setting the tone at this meeting. “…the Bank will also stress that if economic activity rebounds or inflation presses higher again, they will not hesitate to hike rates,” he said.
It’s means your past articles are proving to be wrong.
They’re not wrong, so many people I know who’s payments jumped from $3500/month to almost $7k a month. That’s just with the current interest rates. People aren’t feeling the rates just yet. The squeeze is coming when a lot of the renewals will coming up.
Canadians owe $1.84 for every dollar they earn. Americans owe $1.05 for every dollar they earn. States hikes interest rates,our looney falls, BOC hikes rates again , people lose their homes, claim benkruptcy in droves, then BlackRock or the like swoops in and buys these distress sales, renting the units out, and sell at a later date at profit. This is likely the true plan. Canada’s debt and economy is much different than the US .Following their lead will result in disaster .US is bankrupt anyways, $23 trillion in debt ,and apparently losing the Petro dollar. That in itself should sound the alarm . Sticky inflation, diesel prices have dropped considerably as have transportation charges. The grocery chains are clearly price gouging and posting record profits.Gov needs to step in and tax their profits heavily.
Interest rates are still too low and inflation will continue to rage. Can’t keep printing money forever to pay the bills
Sean Fraser is bringing in too many immigrants.
Got to keep the demand for rentals high for the slumlords and home owners?
I was talking to a couple of my fathers friends who were in Toronto real estate in the 80s and 90s – and remember a lot of immigrants then were so underwater they just took everything they could and flew back to the old country. Their view was that a lot of immigrants today have access to much larger credit card limits/lines of credit…car loans, as well as mortgages, etc. The implication being that many people may max out whatever debt they can, take the spoils or cut their losses as circumstances warrant, and leave Canada.
It made me wonder if all these years with massive immigration, goosing GDP at the expense of GDP per capita, might be the trigger that ultimately gets this party (i.e. Canadian economic collapse) going.
Mine jumped from 1600 to 3450. So fuck tiff and fuck Trudeau and this whole fucking communist regime. They need to cut rates immediately or people wil loose their fucking homes.
I have to pay a few of my bills in US dollars. CDN to US exchange rate is absolutely atrocious at the moment. Interest rates will have to keep pace with US or things are going to get a lot more expensive for everyone. Unfortunately for you, a lot of folks here have no mortgage. They care about the cost of gas and cucumbers more than what you have to pay for your house.
LOL, they wanted more inflation and overshot. Now, they’re afraid of overshooting the other way. Funny thing is, all historical data points to rates needing to be higher than inflation to break the inflationary spiral. This is 1970’s all over again except the breaking point will be 6% instead of double digits due to the outlandish size of debt binge. I mean, come on. +46% on an asset class that was already in double bubble territory after the GFC. No way no one saw this coming. This is criminal on so many levels.
we need at least 6~7% to tame the CPI @ 2% range.
it just has started and you will see.
2nd half of this year will be fun in RE market.
there is no empire that will last forever.
I think this is b…t and they jut want to calm down people and hide something from public. They are talking about many thing which not happened and even a while ago they were say everything is ok and there is not inflation and other issues.