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By Guest Blogger Ryan Lewenza
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For months we’ve been talking about peak interest rates with the Bank of Canada (BoC) set to reverse course and begin to cut rates. Well, with this week’s better-than-expected inflation report the BoC has what it needs to justify a cut, potentially as early as June. If correct, just think of the positive implications for the economy and markets in the coming months.
Inflation eased again in February coming in at 2.8% y/y, below what the economists were calling for (3.1%). This marks the third straight month of slowing inflation and continues the longer trend of lower inflation since the peak of 8.1% back in the summer of 2022. This is great news and shows rate hikes are working.
Canadian CPI fell to 2.8% y/y in February
Source: Bloomberg, Turner Investments
Interestingly, industries getting a lot of negative attention from the Canadian government – telecom and grocery stores – are finally starting to see an easing in pricing pressures with telecom prices actually declining. Yes you heard that correct.
According to Statistics Canada, cellular service prices are down 26% from last year (I need to check my recent bills because that doesn’t sound right) and internet prices are down 13%. And rising grocery prices are starting to abate after a 21% surge in overall prices from last year.
Grocery prices rose 2.4% y/y in February but this is the first time that food inflation grew at a slower rate than overall inflation since October 2021. With lower input prices (e.g., natural gas and fertilizer prices) and all the heat on grocery executives, food prices will moderate further in the coming months.
Canadian food price changes for February 2024
Source: Statistics Canada
A major contributor right now to inflation are shelter costs, and in particular, rising mortgage costs. Rents are up a steep 8.2% y/y but mortgage expenses are up a staggering 26%. If you strip out this cost, which is completely in the hands of the BoC, inflation is currently running at 2%, so job done!
What does all this mean? Interest rate cuts are coming!
Following this inflation report expectations rose for when the BoC will start cutting. Below is what the bond market is currently pricing in. The first cut is expected in June with current odds at 63%, up from 32% odds the week earlier. Then a few more cuts over the year.
Implied Cdn overnight rate and number of cuts/hikes
Source: Bloomberg
The question then is, how many cuts could we potentially see from the BoC in this next easing cycle? For that we need to look back at history.
Since the late 1990s we’ve seen six different times or cycles of the BoC cutting rates. As seen in the chart and table below, on average the BoC cuts five times over each cycle with an average decline in the overnight rate of 200 bps.
A few of these easing cycles occurred during a major economic downturn like in 2001 and ’08. In these instances the BoC slashed rates dramatically – 10 times in 2001 and 9 times in the 2008 cycle.
With our economy in much better shape today it’s doubtful we’ll see anything close to this in this cycle. More likely we’re looking like 1998 or 2015 when the BoC cut rates to help the slowing economy. So, I’m expecting fewer cuts in this cycle and see the BoC cutting maybe 4-5 times taking the overnight rate from 5% currently to low 4s/high 3s by the time they are done.
In fact, there’s potential for cuts until the first half of 2025, then the BoC moves to the sidelines and keeps rates steady, before potentially starting to hike later in 2025. This longer term projection is based on my expectations for the path of inflation, which is lower for now, but then potentially reaccelerating later in 2025, which could then force the BoC to begin hiking again.
But let’s not put the horse before the cart. Key point is that we’re at peak rates and readers can expect some relief on the interest/mortgage rate front in the coming months.
The implications of these rate hikes are: 1) variable mortgage rates look more appealing in this environment; 2) Canadian housing prices could rebound in the coming months; 3) stocks, and dividend stocks in particular, could rally on the cuts; and 4) our struggling Canadian economy could start to pick up later this year and into 2025.
So crack a beer (or a hoppy IPA for you youngsters) as interest rate relief is on the way!
Previous easing cycles from the BoC
Source: Bloomberg, Turner Investments
Details of previous easing cycles from the BoC
Source: Bloomberg, Turner Investments
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.
102 comments ↓
A worthy topic Ryan with some great graphs…
Sadly all the rate decreases don’t decrease the price of the (carbon tax) fuel at the pumps or the demands of people barely scraping by on the wages and takehome pay they see at the end of the week…
Time will tell if this works.
“MISSION ACCOMPLISHED”
Well researched Ryan, thanks.
Actually shelter costs are up, as you say, “staggering” amount because of low interest rates., and if the BOC lowers rates inflation will flare up.
Big problem when you fuel inflation when the cost of living is already at unsustainable levels.
Job not done!
TICK TOCK, TICK TOCK
…potential for cuts until the first half of 2025, then the BoC moves to the sidelines and keeps rates steady, before potentially starting to hike later in 2025…but then potentially reaccelerating later in 2025, which could then force the BoC to begin hiking again.
Sure, or not. Any number of routine global events could change any of that oddly precise prediction. This is why everyone should be in a low cost, broad based passive index funds. Nobody knows nothin’…
I remember March of 2020 was 3 rate cuts of 50 basis points each. It was done within days of each other. Not that it really matters. Just wanted to point it out.
Ryan
Why cut rates 4-5 times, only to start hiking back up 2-3 times for a total of 8 moves in an 18 month period, that does not seem to be steady hand, why not just cut once maybe twice and hold steady. We can also just wait and see what happens to the variable rate holders who will again gorge themselves in debt and they will run back to Tiff to save them again as mortgage debt will be causing shelter inflation to accelerate again and then the cycle repeats. Borrowers are the tail that wags the BoC dog now it seems.
“If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.” ― John Maynard Keynes
That’s good news for my stocks and ETFs investing in REITs, utilities, and bonds. Bring it on!
#93 Stop blaming Justin Trudeau on 03.22.24 at 6:46 pm
Too many people blaming our Prime Minister. He is doing the fundamental things all Canadians want. The climate change initiatives will pay off and some people won’t give him credit for taking a stand to help Canada in the long run.
Truly, some folks just don’t get it.
****
Is this sarcasm?
Look at where this country was in 2015, one of the best in the OECD after the 2008 meltdown. Compare 2015 to today, Canada is not only a laughingstock on the international stage, but our economy has been sabotaged from within. Nobody in this country supports carbon taxes, especially since it increases the cost of everything from food to coffee.
Axe the tax!
Axe Trudeau!
When I see charts that only have 25 years of data and projections made off of them my first thought is:
“Sure, Jan.”
The current situation is structurally much more ’60s, ’70s and ’80s. What did interest rate cycles look like then? Oscillation with a rising baseline. We’ll see short term cuts that will be followed by higher highs in rates.
So April 1st when the costly coalition raises the carbon tax, what’s going to happen when it causes more inflation ???? Bank rates still going to get cut?
You gotta love the smile, I haven’t seen a smile like that since I watched “How the Grinch Stole Christmas”
As per the Fed, there will be rate cuts in 2024, 2025 and 2026. There will be 3 cuts this year and more in the next 2 years. Home prices will go up significantly with each rate cut.
rates are not coming down. inflation is ready to roar. oil set to moon.
Inflation is no longer the problem.
The problem is the inflated prices that we now have to pay, and they are not going down.
Food, housing costs, building supplies, maintenance and repair items, many prices are up 25-50% or more over the last couple years.
This reduces our quality of life and standard of living.
Throw in higher property taxes, carbon taxes, income taxes, etc and it further reduces our wealth.
Likely more tax increases to come to cover ballooning government debt costs and all the pet projects for the lefty’s.
And, education, healthcare, defence, housing are all broken and in need of more funding and/or better management.
The next number of years could really separate the classes.
Prepare accordingly.
And to Sam T #8
Are you an internet cop, why are you reading blogs on the web when you should be in deep mourning yourself.
Reeks of hypocrisy.
Yeesh people. They’re lowering rates because the economy is slowing. Per capita GDP is pretty low. So lowering rates to prevent a recession and significant job loss seems like a good idea. Yes that means asset values (like stocks and real estate) go up. But with a mountain of mortgage renewals coming up, renewing your 2.5% 400K mortgage at 4% is going to be better than 6%. And that means some dollars being able to be spent by consumers.
And if (big if) inflation indeed does go up again in the second half of 2025 they will raise them, because that’s their mandate.
This isn’t hard people. Just pay attention.
Pandering to addicts of cheap money crack…. WCGW!
With our economy in much better shape today it’s doubtful we’ll see anything close to this in this cycle. More likely we’re looking like 1998 or 2015 when the BoC cut rates to help the slowing economy. So, I’m expecting fewer cuts in this cycle and see the BoC cutting maybe 4-5 times taking the overnight rate from 5% currently to low 4s/high 3s by the time they are done.
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We are in 2024. It’s not 1998 or 2015. Just 2024. 2024 is itself, not a close copy of another year.
Everyone has such twitchy prognosticator fingers and thumbs trying to rationalize an unknown and unpredictable future.
The whole point of having a B&D portfolio is not to twitch. When is the best time to buy into the market? It’s now. When is the best time to rebalance? It’s now. Will prognosticating help with that? No. Does active management (and prognostication) beat out index investing? No.
Now is the time to relax and appreciate what’s around us. In the moment. Such a dopamine filled world.
Better to just take those twitchy fingers and thumbs and sit on them.
Prognosticating is meaningless. Actual performance of the B&D portfolio is everything. And yet, no one (or, very few) talk about that.
Why is that?
Distractions, distractions, distractions.
Great post, Ryan. Thank you.
Pretty gutsy of you to go as far out as late 2025 in your projections. I have no clue/opinion as to how things will play out but your reasoning seems very solid. Respect Sir!
#1 crowdedelevatorfartz on 03.23.24 at 10:43 am
Crowdie, time has already told many times how low rates are welfare for speculators at the expense of the savers.
It is basically theft from people who make a living with pipe wrenches, and give the loot to those who have never been on a real work site.
But keep sucking up. While your rent goes up.
Prices remain elevated and are still going up 2.8 percent yoy if that figure is even accurate at all, never-mind government spin.
Better keep a close watch on what’s going on stateside before declaring any kind of victory for how well interest rates have done in fighting inflation in Canada.
The interest rate cuts are coming to support the economy but will be minimal and short lived.
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“A major contributor right now to inflation are shelter costs, and in particular, rising mortgage costs. Rents are up a steep 8.2% y/y but mortgage expenses are up a staggering 26%.”
……………………………………………………………………………..
This statement is pure nonsense.
Shelter, mortgage and rent costs do not contribute to inflation, these rising costs are the backlash of (rising) inflation.
This is the same old govt. spin on how anything but what they do is the source of inflation. The lie handed to a gullible public packaged with a bowtie by political hacks taking the heat off of govt and the Fed/BoC who are solely responsible for inflation to begin with.
And those who adamantly claim they go by the facts and only the facts are those who lean heavily on government and media spin repeating them without question.
The problem with this is the so-called facts being masqueraded for honest to goodness figures barely ever reflect any truth and just go unchecked and unchallenged.
To ever begin to separate fact from fiction – there must be the realization from the start that mainstream media including the financial media, are heavily pro-official pro-government biased immovably fixated on the government narrative of the day.
FACTS? yeah sure… watch-em squeal when you tear their government spun facts to shreds exposing their endless cover-ups and lies.
FACTS … vehemently defended as such – nothing but smooth talk and government spin are what both nations are currently built on, and a pair of leaning house of cards they are.
Canada take note: Stateside there isn’t a strong economy with its under-reported inflation merely creating the illusion of economic growth.
Academics, wall street strategists, journalists, all the political hacks within the mainstream media – simply don’t understand inflation and have been duped by the narrative of the day.
The public who feels the pinch haven’t bought it … they know better than any the glossed over bag of turds they are routinely being handed is just that.
As far as history goes, there is no history to go on remotely similar to these days of exploding debt to go by to plan a recurring future with.
What worked in the past moving forward being applied all over again, is destined to stumble and fall over all that lay ahead now.
Hedge against it to avoid the worst of it.
Rents are too high across Canada. Shelter inflation and food inflation are still problematic. Cutting interest rates will just cause another housing bubble again.
So crack a beer as interest rate relief is on the way!
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So; moving right back to the policy that caused the mess we’ve been in for twenty years running!
Tap a keg.
Rate cuts will send rents to the moon. This is a fact
Rate cuts meh – the average person in Canada won’t see much benefit from this – the daily struggle for many is way beyond what the effects of this will do – drowning in debt, living paycheck to paycheck – oh well the wealth gap continues to widen – thanks for that Mulroney, nice legacy
#9 Gen Z Realist on 03.23.24 at 11:34 am
Is this sarcasm?
Look at where this country was in 2015, one of the best in the OECD after the 2008 meltdown. Compare 2015 to today, Canada is not only a laughingstock on the international stage, but our economy has been sabotaged from within. Nobody in this country supports carbon taxes, especially since it increases the cost of everything from food to coffee.
Axe the tax!
Axe Trudeau!
——————————
Outside the right-wing blogger sphere, Canada is a well-respected and well regarded country.
Nobody likes to pay taxes. News at 11.
Alberta will reintroduce a 13 cent taxes, per litre because the price of crude oil (WTI) dropped: in other words, not enough inflation
Also, the price of Natural gas has also dropped: this will threaten the UCP (all in on oil) budget.
https://tradingeconomics.com/commodity/natural-gas
According to UCP’s narrative, Trudeau is leading a war on oil and gas because the price of gas and oil has dropped.
This will work on the UCP’s targetted audience.
Wow, so you delete and ghost me, and don’t address the reasonable, polite concern that I raised?
FYI to all the supporters of the Israeli government’s genocide campaign in Gaza and the West Bank in the name of “defeating Hamas”: ISIL is alive and well as evidenced by the terrorist attack in Moscow. Defeating insurgents is extremely hard. When you kill tens of thousands of innocent civilians, it’s impossible. At this point, cheering Israel’s actions is willing mass murder at no benefit to anyone.
I have a great way to bring down inflation – make millionaires like me pay more tax
Phil White
https://www.theguardian.com/commentisfree/2024/mar/23/inflation-millionaires-tax-taxation-spending-rich-wealth
Inflation is over then why is gas 198.99.
#27 Joseph R on 03.23.24 at 1:14 pm
#9 Gen Z Realist on 03.23.24 at 11:34 am
Is this sarcasm?
Look at where this country was in 2015, one of the best in the OECD after the 2008 meltdown. Compare 2015 to today, Canada is not only a laughingstock on the international stage, but our economy has been sabotaged from within. Nobody in this country supports carbon taxes, especially since it increases the cost of everything from food to coffee.
Axe the tax!
Axe Trudeau!
——————————
Outside the right-wing blogger sphere, Canada is a well-respected and well regarded country.
Nobody likes to pay taxes. News at 11.
Alberta will reintroduce a 13 cent taxes, per litre because the price of crude oil (WTI) dropped: in other words, not enough inflation
Also, the price of Natural gas has also dropped: this will threaten the UCP (all in on oil) budget.
https://tradingeconomics.com/commodity/natural-gas
According to UCP’s narrative, Trudeau is leading a war on oil and gas because the price of gas and oil has dropped.
This will work on the UCP’s targetted audience.
****
You didn’t address any of my points, nor do you understand what carbon taxes are and how they raise the price of everything, or why the overwhelming majority of Canadians do not want them.
Axe the tax!
Rents are up a steep 8.2% y/y but mortgage expenses are up a staggering 26%. If you strip out this cost, which is completely in the hands of the BoC
Ryan wondering why do you think we should look at numbers without shelter cost? Isn’t it there for a reason?
The for sure Election is only a year and a half away. There’s got to be some good news if our trusted leaders want to get back in again and they can campaign on the good things they’ve accomplished.
Cheery times ahead!
#33 Kaleycat on 03.23.24 at 3:00 pm
Rents are up a steep 8.2% y/y but mortgage expenses are up a staggering 26%. If you strip out this cost, which is completely in the hands of the BoC
Ryan wondering why do you think we should look at numbers without shelter cost? Isn’t it there for a reason?
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I’ll provide the answer. Good question by the way.
Everyone has shelter costs. Be they rent or mortgage costs. Most people are hostage to them.
What do you do when you’re a hostage to something?
You try to fantasize it away. You then hope that everyone jumps aboard in a mass group delusion.
Would be interesting to know how big mortgage and rent costs are for those who squawk the loudest about removing them from inflation measures. I suspect there’s a strong correlation.
I totally get why central banks need to be arms length from politicians. And the public in general.
#31 cuke and tomato picker on 03.23.24 at 2:46 pm
Inflation is over then why is gas 198.99.
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Inflation isn’t over. The target is 2%(ish) which means prices are still going up. High inflation is over (for now). Gas is a terrible indicator anyways because the price is so volatile.
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#33 Kaleycat on 03.23.24 at 3:00 pm
Ryan wondering why do you think we should look at numbers without shelter cost? Isn’t it there for a reason?
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Not Ryan, but I suspect it’s because mortgage expenses are directly impacted by interest rates, which is something the BOC controls. If they lower rate, they lower interest rates, and eventually lower mortgage expenses.
Millech “Why cut rates 4-5 times, only to start hiking back up 2-3 times for a total of 8 moves in an 18 month period, that does not seem to be steady hand, why not just cut once maybe twice and hold steady.”
Obviously I’m speculating a bit here and I don’t have a crystal ball but that call is based on my expectations for inflation. I see a scenario where inflation continues to ease for a while but then picks up later as a result of these cuts, which if correct will force the BoC to then hike again. So that call is based on some logic but clearly a lot can change over the next 12-18 months. – Ryan L
Kaleycat “ Ryan wondering why do you think we should look at numbers without shelter cost? Isn’t it there for a reason?”
I’m not saying we shouldn’t consider shelter costs. I’m saying the high mortgage cost increase is entirely due to the BoC hikes so if they stop hiking and begin cutting rates that this will bring down mortgage cost inflation and therefore overall inflation. – Ryan L
I wouldn’t jump to conclusions this early Faron. The latest video shows Chechens cutting the ear off one of the (supposed) Tajic perpetrators & making him eat it. And this is before they get him into the basement of a Russian prison to suffer like only one can suffer in a basement of a Russian prison. Something wrong with the ISIL story. Those dudes wore suicide vests & went down with the ship. Something to do with a promise of 72 virgins.
Bonds already factor in these cuts. Variables might come down, but fixed 5 year won’t necessarily budge. Nobody called inflation and rates going to 5%. To talk with certainty about the path of rates through 2025 is pure folly and a disservice to those that take this advice as gospel. Be careful. Anything could happen. We could easily have a resurgence of inflation or even a deflationary scenario. Free predictions are worth the price you pay for them.
DELETED
#32 Gen Z Realist on 03.23.24 at 2:52 pm
“You didn’t address any of my points, nor do you understand what carbon taxes are and how they raise the price of everything, or why the overwhelming majority of Canadians do not want them.”
Axe the tax!
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Taxpayers receive a Canada Carbon Rebate quarterly from CRA. For most tax payers that’s more than they’ve spend on fuel surcharges. The carbon surcharge method is an effective way to reduce CO2 emissions.
Notwithstanding PP’s deliberate misinformation to the gullible – most Canadians do recognize the need to address global warming.
Thanks Ryan, it’s insightful.
However, I think the effect of increasing mortgage expenses is often underestimated. They will likely continue to rise during 2024 and 2025, because there’ll be more people renewing their mortgages with increased interest rates than with decreased. So this factor alone will impose upward pressure on the CPI for the next 1.5-2 years.
RE: #11 Empire vista on 03.23.24 at 11:49 am
So April 1st when the costly coalition raises the carbon tax, what’s going to happen when it causes more inflation ???? Bank rates still going to get cut?
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I feel like this is the argumentation style of the person who would have been complaining about extra tax on cigarettes and alcohol when they were first introduced. And the world still moves on, and for the better. Complainers will complain… and then they forget, and people forget about them.
#38 Ryan Lewenza on 03.23.24 at 3:34 pm
Kaleycat “ Ryan wondering why do you think we should look at numbers without shelter cost? Isn’t it there for a reason?”
I’m not saying we shouldn’t consider shelter costs. I’m saying the high mortgage cost increase is entirely due to the BoC hikes so if they stop hiking and begin cutting rates that this will bring down mortgage cost inflation and therefore overall inflation. – Ryan L
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The high mortgage costs are not due to increased interest rates. They are due to adults who decided they wanted to act like children when it came to grabbing as much debt as they could.
When everyone reaches adulthood, and even before that, we’re expected to be as responsible as possible and take accountability for our actions. That includes overextending on debt. Nobody put a gun to heads of the currently (and potentially future) over indebted to sign those mortgage contracts. They did that to themselves. The writing was on the wall and they signed knowing there was a pretty good risk of interest rates rising.
I will refer to Garth’s “suck and blow” comment. Ryan, respectfully, you’re having a suck and blow moment. The BoC includes rent/mortgage costs for a very good reason. It impacts almost everyone directly and it eats a huge chunk of most individuals income.
This isn’t rocket science. This isn’t even grade school math either.
I appreciate the blog post while at the same time it makes me really angry to see how so many smart people delude themselves with fantasy.
#19 Travelling
Prognosticating is meaningless. Actual performance of the B&D portfolio is everything. And yet, no one (or, very few) talk about that.
Why is that?
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Don’t know but I can tell you that my B&D 60/40 that hit a high on Dec.31/21 has just recently returned to that level in the last week to 10 days. It’s been a long road back. Thankfully the previous 3 years before that were in the 14%/yr range so it’s still averaged out quite well and this year I expect another 14%er. YTD 5.57%.
Let her rip.
“Taxpayers receive a Canada Carbon Rebate quarterly from CRA. ”
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No rebate if you live in BC.
Faron “When I see charts that only have 25 years of data and projections made off of them my first thought is “Sure, Jan.”
The BoC only started formally setting rates by a committee and regular meetings in the late 90s so that’s why I started the analysis from this period. – Ryan L
Although we personally have never seen a carbon tax rebate in BC, apparently BC residents DO receive it.
“A single person in B.C. will be able to receive up to $504, up from $447 in 2023, and if they have a child, they can receive $252, up from $223 last year. A married or common-law couple, can receive up to $756 combined, up from $670 last year.”
Hmmm…hubs and I spent them in our dreams?
5% is not “peak interest” and no cuts until Sept at the earliest.
Cuke deleted?? Oh my.
#42 Calgary retiree
Do you realize that Canada has 600 billion trees which help us to be carbon negative? If we are concerned about CO2 emissions then we should be going after China and India. China produces more CO2 all other countries combined. And no tax pays back more than is collected. Our carbon tax affects more than just gasoline prices. Also ask yourself why Mexico and the USA don’t have a carbon tax.
Why exactly do we need to save a segment of the population that maybe over leveraged at the expense of the majority? Isn’t capitalism the survival of the fittest. I am trying to understand the underlying logic. Is it because that segment threatens turmoil to the greater good. Our we afraid of the slightest recession? Didn’t we expect pain? Are we to hooked on cheap and available credit? Are we essentially trying to bandage a festering infected wound?
#29 Faron: FYI to all the supporters of…….
There are certain topics that shouldn’t be discussed at family get-togethers, lest they start unnecessary arguments. Politics, religion etc.
Somehow not relevant to todays topic.
PS: don’t bother yourself with a nasty reply….
Great news for the wealthiest 1% of Canadians. The average home in Vancouver is 1.2 million. 15 times the average family income.
Rebellion is the only solution to the problems facing the vast majority of Canadians.
They are far too complacent to act so the next best option is to leave the country.
https://www.uscis.gov/working-in-the-united-states/temporary-workers/tn-nafta-professionals
Ryan, while it is wonderful to see grocery prices mitigating unfortunately much of the prairies remains under drought conditions. The American midwest has also been having issues so I for one expect the cost of groceries to continue to go up if there are production shortages due to climatic conditions. Then there are the supply chain issues as workers strike or climatic conditions cause delays in delivery schedules. Seems like every time things start to move some other issue arises which adds to the delay.
Sorry Garth but what I said was the truth but may not have been the time and place and for the record I think
Lester B Pearson was our best Prime Minister. Also
unfortunately I was educated under the seminar system
and we were encouraged to challenge the presenter
with the facts then we got a check mark beside our name
in the prof’s mark book and got a better scholarship etc.
What amazes me with this inflation battle is how things get priced. Stopped in for a coffee at a Timmies on Grand Island NY this week, a med cost $2.55 US, that’s $3.50 CDN, roughly double. Parking at Fallsview costs $10, but $50 on a concert night, which to me seems a little much. Airlines charge 5 times as much if you don’t book in advance. Is there no shame in predatory pricing? Pity the poor bugger who doesn’t have the time to shop specials or needs it now.
Another great job this week on BNN btw Ryan, smartest guy in the room, as usual.
Often and almost always when we get ahead of ourselves and think all the conditions are perfect(lowering of rates etc etc) and markets will roar ahead is when they take a ginormous dump. All the excitement has already been built in and stock markets(already at record highs) will likely be lower in 1,2 and 5 years from now. Japan movng off negative interest rates for the first time in 30 years will have a huge effect on world markets. It hasn’t been felt yet but give it 6 months. If you were lucky to make some easy money over the last 6 months? Take some profits because all these good times and perfect conditions always end in tears.
Ryan – having said this…
Obviously I’m speculating a bit here and I don’t have a crystal ball but that call is based on my expectations for inflation. I see a scenario where inflation continues to ease for a while but then picks up later as a result of these cuts, which if correct will force the BoC to then hike again. So that call is based on some logic but clearly a lot can change over the next 12-18 months. – Ryan L
Let’s end all the speculation – BoC rate will be 4 points above inflation rate. Adjusted every 6 months.
Simple, not complicated.
#42 Calgary retiree on 03.23.24 at 3:51 pm
#32 Gen Z Realist on 03.23.24 at 2:52 pm
“You didn’t address any of my points, nor do you understand what carbon taxes are and how they raise the price of everything, or why the overwhelming majority of Canadians do not want them.”
Axe the tax!
—————————————————————–
Taxpayers receive a Canada Carbon Rebate quarterly from CRA. For most tax payers that’s more than they’ve spend on fuel surcharges. The carbon surcharge method is an effective way to reduce CO2 emissions.
Notwithstanding PP’s deliberate misinformation to the gullible – most Canadians do recognize the need to address global warming.
****
This is incorrect. The cost of all good and services goes UP due to carbon tax, this effect gets amplified across the supply chain. You do not get to recoup this price increase in the Canada Carbon Rebate quarterly from CRA.
Also, most Canadians do recognize the need to address the rapidly rising cost of living in Canada instead of wasting billions on so called “global warming” policy.
#57 cuke and tomato picker on 03.23.24 at 5:30 pm
Sorry Garth but what I said was the truth but may not have been the time and place
I was educated under the seminar system
and we were encouraged to challenge the presenter
with the facts
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Gotta step carefully. There are some topics not open to discussion here.
I disagree with people entering my other country, the US, illegally, for example, but although it is indeed happening in great profusion, such commenting is discouraged on this platform.
And fair enough. There are other venues.
#23 Shear voter
“Rents are too high across Canada. Shelter inflation and food inflation are still problematic.”
…………………………………………………………………………………………………
As I said in a comment today and this is a bit of it …
–Shelter, mortgage and rent costs do not contribute to inflation, these rising costs are the backlash of (rising) inflation.
This is the same old govt. spin on how anything but what they do is the source of inflation. The lie handed to a gullible public packaged with a bowtie by political hacks taking the heat off of govt and the Fed/BoC who are solely responsible for inflation to begin with.–
-A gullible public indeed … led by the nose repeating the falsehood of food inflation and shelter inflation, the same as saying rising food and shelter costs are inflation and to blame for it.
This is generally what govt and associated hacks want the public at large to believe. None should ever buy into this bs narrative!
Food and shelter costs are forced upward due in conjunction after a time absorbing lapse to the inflation created through government spending.
Its debt creation not backed by production – with too many dollars chasing diminishing products out of sync with the dollars created out of thin air.
The same holds true with consumer spending through easy credit chasing a diminishing supply of goods not in sync with actual production, in turn forcing prices upward.
Never in history has there been government and consumer borrowing and spending like now and in the past dozen or more years, putting pressure on diminishing supplies fallen out of sync with matching production. In essence – what inflation is and where it comes from to begin with.
The fish rots from the head down.
Governments and the Fed are responsible for inflation, not the landlords and food chain owners and such and such forced to raise their prices. They do not create inflation to begin with.
A very gullible public will learn en-masse before much longer (2025-26) who the real and true purveyors of inflation really are.
I have been telling it like it is for a number of years right here … what and who is behind inflation and why they try to hide it and shift blame on to anything anyone anytime anywhere, but on to themselves who are actually to blame for it so as to continue serving their own Govt and Fed agendas.
Food and shelter prices are still way up and are only continuing to go up further but at a slower pace than before.
Some economy. No! Some win. No!
@#21 Quinty’s questionable quirks
“But keep sucking up. While your rent goes up.”
+++
My rent is “controlled”.
A mere trifle in the Fartzy Financial Fandango.
I just got back from the Vancouver car show at the Convention Center.
First car show since 2019 so expectations were high.
Some observations;
The lines moved quickly and staff were great.
Elevators!
Washrooms!
Honda, BMW, Audi, Volvo….weren’t there.
GM had a massive display….mostly trucks and SUV’s.
Ford was about a third the size of GM’s floorspace.
The cheapest vehicle was a GM at $36,500.
The large trucks and SUV’s were ringing in at $100-150k
There were almost no “regular” cars. ie 4 door sedans.
High performance sports cars, SUV’s (dominated), and trucks.
Vinfast (Vietnamese) and Polestar (Chinese) were there. (Electric only)
No give away swag.
No booths selling car wax or tires or interior upgrades, or other car show crap.
What used to be 4 hours of wandering and not seeing everything was reduced to less than 2 hours and disappointment.
(Glad I purchased an advanced ticket at half price.
@#29 Faron’s
I’m not sure how attacking Moscow and killing civilians hurts Israel on the world stage…
But you do you.
The interesting thing is the U.S. State Dept issued a warning to it’s citizens living in Russia/Moscow last week about a possible imminent attack in Moscow by “extremists” and recommended people avoid public gatherings.
They also shared their intel with the Russians.
Russia dropped the ball…big time.
#57 Cuke
Cuke buddy I told you before not to go there ya crazy nut – meh tonight karaoke at View street social will fix you up – see ya there
The three greatest lies,
1. Cheques in the mail.
2. I won’t … in your ……
3. I’m from the government and I’m here to help.
The fourth is that “most” people get a carbon tax rebate and are carbon tax positive dollars wise.
In BC I have seen no benefits or returns of any sort and don’t know anyone who has.
The Carbon tax is invisible to the consumer but contributes to inflation at every level of input, production, transport and retail.
And you pay it directly on heating products and fuel.
It is cumulative and taking money out of every citizens pocket, it is contributing to the reduction in our standard of living.
Telecom and groceries down? Just a month after being attacked by government? What a coincidence. ‘Scuse me for being a cynic but I don’t believe in fairy dust and unicorns. I just read through BCEs financials. There’s no 25% mentioned. A head of iceberg lettuce is on the shelf today at $6.99….just like last month. There’s so much smoke up my butt excuse me if I’m coughing.
#47 Barb on 03.23.24 at 4:22 pm
“Taxpayers receive a Canada Carbon Rebate quarterly from CRA. ”
———————————-
“No rebate if you live in BC.”
AND,
#69 Doing my Part on 03.23.24 at 7:35 pm
“In BC I have seen no benefits or returns of any sort and don’t know anyone who has.”
There is no federal refund in BC because BC has its own climate action and TAX CREDIT.
https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/credits/climate-action
Deliberate ignorance?
129 IHCTD9 on 03.23.24 at 10:09 am
#107 yvr_lurker on 03.22.24 at 8:32 pm
For my wife and I we started with a big zero. I went in 50% to by my mother (who was a single mom) to help her buy a small condo years ago before I had bought anything for me. Now with a household net worth of well
north of 6M, I am now more aware that the policies of our politicians have effectively pulled the ladder up on our younger generations just starting out. Many of those are trying to climb up from zero as I was years ago, and there is not a prayer they will make it in what Canada has morphed into.
—————
You live in the GVRD correct? I think a good look at what built your 6M net worth will answer your questions much better than lunch with Gen squeeze. I doubt employment income did the heavy lifting right? More likely RE gains and liquid assets did – same as me, and most others here. Or maybe a successful business.
A repeat of what we saw in RE ain’t gonna happen. It was more lust than policy, and only boomers, Gen X, and elder Mils were lucky enough to board that train. We were lucky, the kids today aren’t, at least not in that realm. Hopefully Kershaw ain’t putting his faith in government to lower urban house prices…
The kids today should work around what they’ve got going for them. Kids today can make a great income at a young age. They have 3 tax shelters to exploit here in Canada. They have access to low fee ETF’s and 1% professional management and financial/tax guidance. Easy access to electronic trading platforms. They have access to limitless info on the internet. Remote work, and international work offer massive benefits. They have the potential to attain the position of “F-Y” much earlier than us crusties ever did. Mils and Gen Z can look forward to a massive inheritance, anointing them with all the gains their parents enjoyed – if it wasn’t pilfered ahead of time and sunk into a house. Therefore, this is where the effort should be expended – building liquid assets. Forget about owning overpriced YVR/GTA RE, total waste of effort and valuable capital – find some other way to get a roof.
———————————-
Some very good points.
To get there, total disregard for the advice of their boomer parents is essential.
And maybe one day a house will again become nothing but a shelter.
And renters and owners shall live together in harmony.
Amen.
#47 Barb on 03.23.24 at 4:22 pm
“No rebate if you live in BC.”
#69 Doing my Part on 03.23.24 at 7:35 pm
“In BC I have seen no benefits or returns of any sort and don’t know anyone who has.”
There is no federal refund in BC because BC has its own climate action and TAX CREDIT.
https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/credits/climate-action
#1 crowdedelevatorfartz on 03.23.24 at 10:43 am
A worthy topic Ryan with some great graphs…
Sadly all the rate decreases don’t decrease the price of the (carbon tax) fuel at the pumps or the demands of people barely scraping by on the wages and takehome pay they see at the end of the week…
Time will tell if this works
———————
Carbon tax will increase by 3cents in April.
If you can’t effort that, get a smaller car.
Or take the bus.
“One trick pony” PP is staking his election hopes on cancelling the carbon tax.
I would expect a future PM to have a much wider platform.
In BC the Carbon Tax Credit is reduced at $39,000 and zero if your income is $61,000 or greater.
The Carbon Tax Credit is directed to the 40% that pay no tax.
Is this fair or socialism?
52 No way on 03.23.24 at 4:46 pm
#42 Calgary retiree
Do you realize that Canada has 600 billion trees which help us to be carbon negative? If we are concerned about CO2 emissions then we should be going after China and India. China produces more CO2 all other countries combined. And no tax pays back more than is collected. Our carbon tax affects more than just gasoline prices. Also ask yourself why Mexico and the USA don’t have a carbon tax.
****
Mexico is super cool and climbing the world ladder fast. Young educated work force with great work ethic. Their literacy rate is already much higher than the USA but the trend upward will shock everyone. I see it every day. Canadian and American MSM are denying it hard but it’s coming. I daily meet Mexicans repatriating back from the USA to give their children a better life. Oh right, no useless crippling carbon tax.
74 Ponzius Pilates
Carbon tax will increase by 3cents in April.
If you can’t effort that, get a smaller car.
Or take the bus.
“One trick pony” PP is staking his election hopes on cancelling the carbon tax.
I would expect a future PM to have a much wider platform.
******************
Another daily zinger of intellectual prowess we’ve come to expect.
#37 Ryan Lewenza
Thank you for the response, If inflation starts to accelerate it may get harder every time to control it, since the people will just start/keep spending like crazy knowing high rates are just temporary. The government has your back and it will be “hard times” for shorter and shorter durations since it seems paramount that the agenda is to avoid a recession (which blows off excess) at any cost now. I am amazed that 5% mortgage rates are considered to be too high for consumers and we are looking at 3% ish now after the next round of cuts, then we get more indebted and those rates will be considered too high again and then have them lowered down once more.
Does it not seem that TPTB support those without financial prudence and are openly encouraging this, because the people who have eschewed debt and saved have been seriously financially smoked and hammered down the ladder by those recklessly taking on astronomical amounts of risk, which as we all have seen in our real estate and other assets.
Imagine waiting to save for a bigger down payment for the last decade only to keep losing out by those who just winged it and are being rewarded economically. Also think of those who had acted on the blogs prediction of market recovery last October and used leverage to magnify market gains as well. This blog preaches balance and buy within your means eschewing risk but that has left many in the dust and if risk was taken rewards were bestowed.
There are no consequence for making bad decisions any more in our society, everyone wins no one loses, so this is why in my opinion inflation will not be capped, just keep borrowing more to keep up.
End of rant!
“all the heat on grocery executives, food prices will moderate further in the coming months.”
what about heat on consumers? eggs went up yet again last week. The rate of inflation increase on food may have slowed but prices are certainly not dropping.
Wage share dynamics and second-round effects on inflation may be just around the corner if Canadian interest rates fall to soon and too quickly.
Nothing like a good old wage price spiral to slap the central banker in the face and make leveraged folks cry.
Expect government housing incentives to start the next wage/price spiral. The only thing that can push the inflation genie back into her bottle is a painful Canadian recession.
#69 Doing my Part on 03.23.24 at 7:35 pm
The three greatest lies,
2. I won’t … in your ……
—————
Yes! ‘I won’t eat sunflower seeds in your boat’. And they always do and they always jam the bilge! Argh.
What does Bill Gates have to do with any of this!?
#76 Don Guillermo on 03.23.24 at 9:25 pm
52 No way on 03.23.24 at 4:46 pm
Oh right, no useless crippling carbon tax.
—
Oh, really?
Maybe you intended to say the tax is beneficial, in which case I agree but would prefer a much larger carbon tax equivalent to covering the external cost of the fuel.
“And no tax pays back more than is collected.“
It’s simple. Canada collects millions and millions of carbon tax dollars from people who aren’t eligible for the rebate. That’s how the system works.
Who says dogs can’t do math ?
https://x.com/divyakumaari/status/1771646982882271296?s=20
Only reason food inflation slowed was because of the demand destruction caused by people dumpster diving to feed themselves. If this is victory I hate to see defeat.
I had a nightmare; Tiff took off the face mask, he is Ben Bernanke! Gaaaah.
#75 Doing my Part on 03.23.24 at 9:06 pm
In BC the Carbon Tax Credit is reduced at $39,000 and zero if your income is $61,000 or greater.
The Carbon Tax Credit is directed to the 40% that pay no tax.
Is this fair or socialism?
_______
Let me help since you must not have a dictionary in your house or access to google: “Socialism is a political and economic system wherein property and resources are owned in common or by the state.”
#83 Faron on 03.23.24 at 11:11 pm
#76 Don Guillermo on 03.23.24 at 9:25 pm
52 No way on 03.23.24 at 4:46 pm
Oh right, no useless crippling carbon tax.
—
Oh, really?
Maybe you intended to say the tax is beneficial, in which case I agree but would prefer a much larger carbon tax equivalent to covering the external cost of the fuel.
————————-
That’s the issue with carbon tax haters.
Their hatred makes them blind to the reality around them.
The real scary part is, they all will vote for PP.
If anyone was too lazy to read Ryan’s full post, here’s the summary:
Inflation is down, but everything you need in order to live continues to get more expensive.
Carbon tax, already paying in BC
Now socks will add to BCers paying more in tax in April.
I’m just back from Hanoi, Ho Chi Minh and Bangkok.
An eye opener…..
Now those places need a tax.
WE got off the plane at YVR, kissed the earth and took a big gulp of fresh air….. Not certain the great white north’s taxing of all of us on carbon is going to help those violating cities….
Upenuff
#75 Doing my Part on 03.23.24 at 9:06 pm
In BC the Carbon Tax Credit is reduced at $39,000 and zero if your income is $61,000 or greater.
The Carbon Tax Credit is directed to the 40% that pay no tax.
Is this fair or socialism?
……
Many people making less than $60 000 still need a vehicle for their work so this does help them a bit with their fuel costs. For many, the increase of 3 cents a litre, is inconsequential.
@#82 ai
“What does Bill Gates have to do with any of this!?”
++++
He’s a self made rich billionaire so he’s obviously an evil oppressor that deserves 110% socialist taxes to teach him a lesson and make every one else equal.
@#83 Faron
“I agree but would prefer a much larger carbon tax equivalent to covering the external cost of the fuel.”
+++
What does it cost to feed your horse and where do you hitch it?
How do you heat your house and where does the fuel or power come from.
Where does the food in your fridge come from?
Where does your sewage go and who deals with it?
All carbon related items that will be increasingly taxed under our new, glorious quest to reverse 175 years of industrial pollution. ( we’ll ignore the rise of industrial China and India for now)
Or, is it a cash grab by a desperate, indebted govt. ?
Take your pick.
The ever increasing Carbon Tax is but the start.
Toronto is proposing a “Rain Tax”….
https://torontosun.com/opinion/columnists/kinsella-torontos-overlords-pondering-implementation-of-a-rain-tax
A “rain tax” you say…what an interesting idea for more tax revenue and it will save the planet!
A win win.
Vancouver and Victoria residents take note….
@#88 Lorne
” For many, the increase of 3 cents a litre, is inconsequential.”
+++
Not really.
I filled up two company vehicles on Friday.
$150 in the first van at $1.99.9 ( 75 liters)
Exactly an hour later….
$150 in the second van at $2.00.9
The second van received almost 1 liter less of fuel.
So
Toss a $2 coin on the ground and leave it there because it’s “inconsequential”.
I spoke to a friend who is a long haul trucker.
His tractor ( with two fuel tanks) holds about 1000 liters.
The mountains of BC don’t make for fuel efficient cruising.
This 3 cent rise per liter is merely the beginning and that carbon tax increase will be passed down the line every time a hauler touches a product.
Bank on it.
Carbon tax is going up 3 cents a litre April 1st.
Add that to the existing 11 cents and you are going to be paying 14 cents a litre at the pump April 1st.
And then it keeps going up until it doubles in 2030.
In addition to what you pay at the pump, this is inflationary, it adds cost to production and transportation of items and food, not to mention natural gas, propane and heating oil.
If you make over $61,000 in Canada, you get virtually no rebate, each province and Territory is different but those are the numbers.
I stand by the statement that this tax is socialistic, among other things, in that it redistributes wealth.
Anyway, I prepared by buying XEG and Enbridge, the divvies and cap gains have more than covered my fuel costs.
There’s some benefit to decades of prudent financial choices.
Early years with kids can be stressful and tight, but stick to the plan, and by middle age…
…dropping $8k on a fun weekend is entirely unremarkable. Multicourse wagyu steak/seafood dinner for four was $2300 + tip last night. :-)
Personal card? Corporate card? Eenie meenie miney moe…
#76 ‘Don’ – thing is, going after China or India isn’t something most countries are willing to do. Easier to dump on Canada who won’t do things like threaten to invade/impose sanctions/cut off trade/recall diplomats etc. China responds with aggression any comment on its policies that it sees as interference with how they operate; India has taken the page from that playbook & run with it in recent times. The USA is also a major polluter & yes, has had various organizations call them out on it which has resulted in what exactly? Heck, even their own citizens tend to get short shrift despite well documented issues with pollution so what chance outsiders?
#90 Dharma Bum on 03.24.24 at 8:47 am
Also that lowering interest rates is deserving of a celebration, hence:
To be fair, it’s not easy to write up articles on a regular basis and not fall into contradiction.
Although the writers have the censor hammer, some of it gets through.
And we are a tough audience.
Then there is the challenge of trying to dignify the blog while including and publishing posts from the Sailorman and the Fartman
I saw Ryan on BNN. He mentioned preferred shares. I have done well by them. They have paid out when I needed them. Something I will not regret. I am dealing with surplus cash but do not worry as I will find a way to win or lose. I am hunting.
I tried to respect money to my daughters. I might have been to being talking to deaf ears. I would say to them – “do not forget who you are”. They did better than me and I am no slouch.
I am looking to get. What is life without a challenge. Sometimes I luck out it my bets but I also do suffer. My money will not sit idle. I could turtle but that is not me = there are many stones to kick over.
You said that you felt that internet prices had not reduced, and needed to look into it. However you assumed lower prices as your article progressed. My experience since the Rogers Shaw merger is that Rogers raised prices right away. I question whoever is providing that consumer data.