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Canada’s Inflation Sets – January 25th, 2024

25 Jan Canada’s Inflation Sets – January 25th, 2024

Posted at 14:55h in Blog by
 

 

Weekly Digest

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January 25th, 2024

 

 

Bank of Canada Announcement

The Bank of Canada is done with rate hikes. That message was very clear in the announcement yesterday as stated they are “confident enough” that inflation is on the right track. We no longer have to dwell on rate hikes. We change gears and focus on how long the rates will stay at their current level, and when will the first cut occurs.

In the presser, Tiff Macklem stated; “We need to give these higher interest rates time to do their work”. Traders have now priced in cuts in June, September, October and January 2025.

The next major report will be on February 20th which will show us the progress on inflation. If these numbers improve, expect fixed rates to fall even further.

From my final update in 2023, I mentioned we need to see 4 items before a rate cut occurs. Based on yesterdays announcement, we have reached 1 of the 4

  • Inflation starts with a “2”
  • Unemployment starts with a “6”
  • BoC communications and language will turn less hawkish
  • The following meeting’s rate cut probabilities will exceed a 60% chance

 

Canada’s Inflation Sets

In order for rates to decline, Canada’s inflation rate must continue to decline. The Bank of Canada’s target remains 2%.

The headline inflation number came in 3.4% last month which matched market expectations. This was attributed (same as in the US) to a rebound in gasoline prices in December as compared to November.  Also, mortgage interest costs continue to cause elevated inflation numbers due to the Bank of Canada’s rate increases. At the current pace, we may not see inflation into the “2’s” until March.

 

US Inflation Data Sets

The annual inflation rate in the US went up to 3.40% in December 2023 from a five-month low of 3.10% in November. Markets were forecasting 3.20%, as energy prices went down at a slower pace.

 

Mortgage Lender Growth

Scotiabank all but pulled out of the lending business in 2023; however, they are back to being aggressive in 2024. We are shifting most of our clients to Scotiabank which is great news as they offer the best mortgage product, and best service for underwriting. Bank of Montreal is also entering the broker channel imminently.

 

December Housing Data

December housing stats are listed below for the major urban markets in Ontario.

 

Current Interest Rates

CONVENTIONAL

  • 5 year fixed, 30 yr amortization – 5.25%

  • 3 year fixed, 30 yr amortization – 5.50%

  • 2 year fixed, 30 yr amortization – 6.00%

  • 5 year variable, 30 yr amortization – Prime – 0.60% = 6.60%

  • 5 year fixed, 25 yr amortization – 5.15%

  • 3 year fixed, 25 yr amortization – 5.40%

  • 2 year fixed, 25 yr amortization – 5.90%

  • 5 year variable, 25 yr amortization – Prime – 0.70% = 6.50%

INSURED

  • 5 year fixed, 25 yr amortization – 5.09%

  • 4 year fixed, 25 yr amortization – 5.14%

  • 3 year fixed, 25 yr amortization – 5.19%

  • 5 year variable, 25 yr amortization – Prime – .90% = 6.30%

 

Fast Facts

  • 11.1% – Decline in Canadian home sales in 2023 compared to 2022, marking the lowest annual level since 2008. Home sales in December did have the largest year-over-year gain since August, though.

  • 234 million – iPhones that Apple shipped in 2023, becoming the world’s largest smartphone maker by volume. Samsung had held the title for the previous 12 years.

  • 4.2 million – Barrels of oil a day that Alberta produced in November, a new all-time high. Production has ramped up to prepare for the almost-complete Trans Mountain pipeline expansion.

  • 21% – The share of live sports broadcasts that are taken up by gambling messages and ads, according to a CBC report. On average, broadcasts have a gambling message every 2.8 minutes.

  • 100 – Ranking that TD was given on Brand Finance Global’s list of the most valuable brands in the world, making it Canada’s most valuable brand. Apple took the top spot overall.