Bank of Canada Interest Rate Announcement - Up, up and away another 75 bps!

Article supplied by Dave Bannatyne, Wellington-Altus Financial Inc.



The Bank of Canada (BoC) hiked the overnight interest rate 75 bps on September 7, bringing the overnight rate to 3.25%. The BoC also squashed any hope that they were finished my making it clear that “policy interest rates will need to rise further.”

Going forward, the pace of rate hikes is likely to be in clips of 25-50 bps and inflation remains the most important data point. The full text of the BoC’s announcement can be found HERE.

This is great news if you are a saver, but bad news for borrowers (and for the Cdn housing market), specifically if you have a variable rate mortgage as more of your mortgage payment goes towards paying the interest on the mortgage than the principal. Current money market rates are around 3.50% vs a 5
%. Given nearly 40% of the Cdn GDP is levered to the housing market, the economy is going to slow rapidly and unemployment is going to begin to rise. The much desired “soft landing” for the economy may just have changed trajectory. Brace yourself.

Our Chief Market Strategist provides some interesting graphics that I have enclosed below. You can draw your own conclusions, but it seems to me that the economy is slowing, inflation has peaked, and just as surprised people have been by the speed of interest rate increases, they might be just as surprised by the speed of interest rate cuts in 2023.




https://www.ft.com/content/8a1437fb-5f0b-4734-9839-8d41dacad27a


Using the 70' and 80's as our road map... when gasoline flatlines CPI drops!




5 year breakevens inflation expectations negative for year.



Most of Russias pipelines go west not east    east .. they need Europe as a client. 



Shipping cost dramatically falling.



Economy dramatically decelerating.



September seasonality not good.



Canadian Household Debt highest in G7.




If you would like more information on how the interest rate increases might affect your plans to buy or sell a home, please call or text us at 403-207-1748 or click HERE to schedule a call. If you would like a free home evaluation click HERE.