In this month's edition of Canadian Inflation numbers....

So This is Adulting...

Okay so I'll be the first to admit that I have a problem. The eagerness and anticipation I have over the release of inflation reports and outlook surveys might not be entirely healthy. Like if someone told much-younger-Ray that these things would elicit a similar response to next week's episode of Doogie Howser M.D.....well, suffice it to say that much-younger-Ray would probably travel through time and slap current-Ray upside the head. But here I am. Breaking down the relevant information from these reports. And I feel no shame...

Distilling It All Down...

The Bank of Canada (BoC) released their Business Outlook and Consumer Sentiment survey results yesterday. Meanwhile, Stats Canada released the December inflation data today. And while there's a lot of information to sift through, the one, clear takeaway is that the BoC's (extremely uncomfortable) rate increases are starting to take root. Every measure of inflation dropped last month (Headline, CPI Core and Trim as well as 3 Month Annualized). And the outlook of both consumers and businesses on inflation have moderated across all time horizons. Really, what we're looking at this:

1. Inflation has peaked and is steadily, but slowly, trending downwards
2. Expectations of inflation, though still higher than is desirable, are moderating and even declining
3. Both businesses and consumers are modifying spending and investment decisions downward based on recession fears and overall higher costs

Assuming these trends continue as they should through the spring, the downward pressure we're seeing on fixed rates of all terms should continue. And that would be welcome news. What we're curious about here is yet another thing much-younger-Ray couldn't care less about: bond yields. As these drop, so too should fixed rates. And the 5 year bond yield is trending downwards as I type this out.

Looking Ahead to January 25th...

Next Wednesday, the Bank of Canada will announce it's first policy rate decision of 2023. And as of this moment, the expectation is that they will go with another 0.25% increase before they pause. The 104,000 jobs added to the economy in December is likely too much for them to ignore even with the latest sentiment and inflation numbers. Beyond next week however, a pause is looking more and more likely. And that would oh-so-very welcome. 

And so from here, I wait in eager anticipation of next week's BoC announcement (did I mention they're releasing their Monetary Policy report too!?!?!). I'll barely sleep I'm sure. Heck - I might even host a watch-party....

But in the meantime, please reach out with any questions. We're here to help and if you're curious what options are out there or are feeling the pinch of higher costs, we can help. And always feel free to pass this on to friend - we're always looking to make new ones!