According to Avery Shenfeld, managing director and chief economist at CIBC Capital Markets, an interest rate cut by the Bank of Canada is not likely to happen until at least early 2024. This is due to food prices forming a major part of the central bank’s new core inflation measures, “which will keep those running above a 3% annualized rate for now”.
Spending has shifted considerably over the past few quarters - from traditional grocery stores to bulk distributors - leading to uncertainty in terms of pricing and demand. This pent-up pandemic demand may have an influence on inflation expectations and the risk of a wage-price spiral.
Still, overall spending patterns might lead to a return to normalcy in terms of household spending behaviour. Shenfeld predicts that cuts might take place as early as Q1 2024 but only if concerns about the US economy don't escalate or unemployment doesn't rise enough to put pressure on wages.
What does this mean to you? If you are coming up for renewal you may want to hold out as long as possible before shopping for new rates. It's important to speak with your financial advisor or mortgage provider to help you make the best decision for your unique situation. With some patience and careful planning, you can get the best out of this economic recovery.
It’s also important to remember that change is inevitable, and it’s essential to stay on top of developments in the markets. Keep up with news and trends around inflation.
https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
https://globalnews.ca/news/9464841/bank-of-canada-lending-rates-cut-survey/
Jacob Bodzek
Real Estate/Mortgage Broker
Jacob@westwood.team