BoC Officially Hits the Pause Button

No Change for a Change

Change is good. Or so I'm told. It has been almost exactly twelve months since Tiff Macklem and Bank of Canada (BoC) began their war on inflation. And after eight consecutive and very stressful policy rate announcements, the BoC followed through on their January commitment of a conditional pausing of rate hikes. 

And though I'd like to say a collective sigh of relief was breathed by all, I think that really happened at the January announcement where the expectation was set for a hold. Today's announcement was much like watching a suspenseful movie where we knew the ending. It reminded me of the fall of 1999 when The Sixth Sense was in theatres. I was hanging out with some friends - none of us had seen the film - when an acquaintance (immediately turned enemy) passing by overheard us and shouted "YOU'D NEVER GUESS HE WAS DEAD THE WHOLE TIME!". Eventually I saw the movie - but it was hard to get too excited over.

What to Expect Moving Forward

Some key data points the BoC is monitoring domestically are consistently trending in the right direction. GDP growth has stalled and is expected to remain flat through the first half of 2023. Inflation is coming down nicely and expected to continue it's descent over the coming months. But it's not all good news. There are a handful of other factors that could make the BoC's life more difficult. Things like:

• A strong Canadian job market that could fuel wage growth
• A stronger than expected US and World Economy 
• China's re-opening of their economy
• Russia's war on the Ukraine

Canada is performing well but our reality is also influenced by what happens globally. I still believe the only missing ingredient here for us, is time - not more rate increases. But if there is a risk at this point, it's that global strength forces Tiff Macklem's hand into bumping the BoC's policy rate upwards one more time.

What to do

Every market is overly sensitive and reactive lately. We're likely to see swings in interest rate markets as data points are announced. But it's looking more like we've reached the peak of interest rates and the next moves will be in the downward direction. Most of what we're recommending these days are short term fixed rates (2 and 3 year terms) that see borrowers renewing into what will almost certainly be a significantly lower interest rate market. And we have seen some current variable rate borrowers wanting to explore converting to those shorter term fixed rates. To know if that's right for you, reach out and connect. We'd be happy to model out what the market is expecting and how it impacts your mortgage.

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