Bank of Canada Holds

Despite the economy facing the existential threat of 25% tariffs back in March, the Bank of Canada seemed reluctant to commit to aggressive policy loosening because of upside inflation risks. Underlying inflations pressures remain strong,

What’s next? There is considerable uncertainty about the extent to which tariffs will weigh on economic activity. We know for certain that underlying inflation is already too high and almost certainly heading higher.

The Bank’s communications were mostly dovish, which lends some support that it will continue cutting interest rates throughout the year.

The next announcement is June 4^th, 2025 and expectations are a cut of 0.25%.

Canadian Inflation Numbers

A large 4.6% m/m fall in gasoline prices meant that headline inflation fell sharply to 2.3% in March, from 2.6%. Even so, stripping out gasoline, CPI inflation edged down to 2.5%, from 2.6%.

With the three-month annualized pace of averaged core measures holding uncomfortably high at 2.7%, and downside risks to the economy easing as trade tensions with the US de-escalate, it was expected the Bank to keep interest rates on hold, while it waits to assess the impact of retaliatory tariffs. This came to light on Wednesday.

U.S Inflation Numbers

South of the border, higher inflation is now the consensus, but this week’s U.S. data offered a mixed bag.

Headline: 2.4% (est. 2.6% | prior 2.8%) -0.1% m/m (est. 0.1% | prior 0.2%)

Core: 2.8% (est. 3.0% | prior 3.1%) +0.1% m/m (est. 0.3% | prior 0.2%)

The bottom line, if tariffs stay in place, all inflation measures, including CPI, PPI and PCE should accelerate.

High Tariffs on Pause

The President slashed his reciprocal tariffs on almost all countries to the minimum 10% rate for the next 90 days. Canada also gets the 10% minimum reciprocal tariff.

One glaring exception is China. Trump chose not to give it the group discount, instead hiking its tariffs to 125%.

The exemptions for various electronic goods (including smartphones and laptops) announced over the weekend has reduced the effective tariff rate on imports to the US from China. It still stands at just over 100%. This is up from about 12.5% at the start of this year.

The short term consequences will be higher prices for US consumers.

Home Sale Data – March

The 4.8% m/m fall in home sales in March means they have now slumped by 21% since November. This is the slowest March since 2009.

With the larger decline in single-family home prices, this is suggesting that owner-occupiers rather than investors are behind the most recent weakness.

Nonetheless, given the recent fall in mortgage rates and some clarity on US tariffs, there seems hope for conditions to stabilize soon.

Unemployment

Unemployment rose on tariff disruption. Canada lost 33,000 jobs in March, the largest decline since January 2022. That pushed the unemployment rate up to 6.7% from 6.6% in February.

The losses were likely driven by uncertainty caused by U.S. tariffs, with employment falling in manufacturing. Job losses are likely to continue in the coming months if tariffs remain in place. Ingersoll, Hamilton and Cambridge has already started to feel the effects.

Consumer Confidence

While Canada escaped “liberation day” relatively unscathed, the imposition of US tariffs and the risk of more to come will still weigh on exports, consumer confidence and investment.

With immigration also plunging, we now expect GDP to expand by just 0.4% annualized on average over the next four quarters.

All while consumer confidence continues to fade…

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 4.34%
• 3 year fixed, 30 yr amortization – 4.39%
• 2 year fixed, 30 yr amortization – 4.84%
• 5 year variable, 30 yr amortization – Prime – 0.40% = 4.55%
• 5 year fixed, 25 yr amortization – 4.29%
• 3 year fixed, 25 yr amortization – 4.34%
• 2 year fixed, 25 yr amortization – 4.74%
• 5 year variable, 25 yr amortization – Prime – 0.50% = 4.45%

INSURED

• 5 year fixed, up to 30 yr amortization – 4.19%
• 4 year fixed, up to 30 amortization – 4.24%
• 3 year fixed, up to 30 amortization – 4.14%
• 5 year variable, up to 30 amortization – Prime – .70% = 4.25%

Fast Facts

• 1,500,000 – iPhones that Apple reportedly airlifted from India into the U.S. to avoid the new tariffs on China. The company is racing to move more of its production out of China.
• 36 – The average number of days it’s taking for condos to sell in the GTA, which is 11 days longer than single-family homes.
• 6 – The number of consecutive months to see year-over-year declines in average asking rent in Canada.
• 106 – The number of active cranes in Toronto as of the first quarter of 2025, the most of 14 major Canadian and American cities.
• 60% – Share of Coachella attendees who financed their general admission tickets to the festival using a payment plan. Down payments for the tickets started as low asUS$50.