Hey Everyone,
The Bank of Canada announced yesterday. Held at 2.25%, prime stays at 4.45%. That's seven in a row.
Markets expected it. So did I.
Three weeks ago I told you I was moving my own clients to fixed rates, and why. So let's look at what the Bank actually said and where that leaves things.
There are two problems now, not one.
All summer the problem was oil. The war has the Strait of Hormuz mostly shut, gas stays expensive, and that's kept headline inflation near 3% while everything else sits close to 2%. The Bank has been looking past it.
Yesterday they added a second one. Trade talks with the US broke down. Washington announced new tariffs, Ottawa answered with counter-tariffs, and the Bank said those will raise costs for some businesses and could feed into consumer prices over time.
They also said upside risks to their inflation forecast have increased. That's their wording, not mine.
And the economy underneath all this is stronger than people expected. Second quarter growth came in at 3.3%. Unemployment fell to 6.4%. A growing economy with two things pushing prices up is not an economy that gets a rate cut.
Where the fixed call sits.
In August I said cuts were off the table, rates had more room to go up than down, and a rate hold covers you either way at no cost.
Nothing in yesterday's statement changed that. The Bank held, and said the risks lean toward higher inflation. One TD economist described them as cautious and data-dependent. Nobody I follow is forecasting a cut anymore.
If you took the hold, nothing changed for you. Your rate is where it was.
If you're in a variable, the Bank just told you the thing it's watching is getting bigger. The next decision is October 28, and that one comes with a full forecast update.
Three statements, same number, different wording.
If you've been reading since June, you've now seen three of these.
In June they sounded stuck. Soft economy, oil inflation, no good options.
In July they called the rate appropriate.
Yesterday they said the risks have increased.
The number was 2.25% all three times. The wording moved in the same direction all three times. When you're trying to figure out what the Bank does next, the wording tells you more than the number does.
One number for anyone renewing.
CMHC surveyed people who renewed in the last year and a half. The average payment went up $375 a month. More than a third said it put real pressure on the budget.
If your renewal is coming up and you've been hoping the Bank moves before your date, yesterday should settle that. Plan around the rate that exists. Two weeks ago I wrote about what to do if the payment is already more than you can carry, and that edition is still there if you need it.
Seven quiet weeks ahead.
The next announcement is October 28. Nothing between now and then.
Labour Day is Monday. The fall market opens Tuesday. That's seven weeks of shopping with no rate news in the middle of it.
If you're buying or renewing before Christmas.
Hit reply with your date and we'll get a hold in place before October 28.
Same offer as August. It costs nothing, and if rates drop before you close, you take the lower one.
Enjoy the long weekend.
-Andrew
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