London Mortgages

Heads up friends. Bonds are up and this could trigger a fixed rate increase.

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.

Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment. In the euro area, the economy looks to be in a mild contraction. In China, low consumer confidence and policy uncertainty will likely restrain activity. Meanwhile, oil prices are about $10 per barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have eased, largely reversing the tightening that occurred last autumn.

The Bank now forecasts global GDP growth of 2½% in 2024 and 2¾% in 2025, following 2023’s 3% pace. With softer growth this year, inflation rates in most advanced economies are expected to come down slowly, reaching central bank targets in 2025.

In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted. With weak growth, supply has caught up with demand and the economy now looks to be operating in modest excess supply. Labour market conditions have eased, with job vacancies returning to near pre-pandemic levels and new jobs being created at a slower rate than population growth. However, wages are still rising around 4% to 5%.

Economic growth is expected to strengthen gradually around the middle of 2024. In the second half of 2024, household spending will likely pick up and exports and business investment should get a boost from recovering foreign demand. Spending by governments contributes materially to growth through the year. Overall, the Bank forecasts GDP growth of 0.8% in 2024 and 2.4% in 2025, roughly unchanged from its October projection.

CPI inflation ended the year at 3.4%. Shelter costs remain the biggest contributor to above-target inflation. The Bank expects inflation to remain close to 3% during the first half of this year before gradually easing, returning to the 2% target in 2025. While the slowdown in demand is reducing price pressures in a broader number of CPI components and corporate pricing behaviour continues to normalize, core measures of inflation are not showing sustained declines.

Given the outlook, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Information note
The next scheduled date for announcing the overnight rate target is March 6, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on April 10, 2024.

This is a very interesting article. Please take a couple of minutes to read what different economists are saying about rates and the future.

3% by the end of 2024: What economists say
about the Bank of Canada's interest rate
decision

The Bank of Canada held its benchmark interest rate at five per cent on Oct. 25,
its second consecutive pause, meeting economist expectations amid a slowdown
in the economy.
The bank said there is growing evidence higher interest rates are cooling the
Canadian economy and noted easing demand for housing, goods and services
and business investment in its statement accompanying the decision .
“Signs of flagging demand were reason enough for the Bank of Canada to keep
its target rate on hold,” Avery Shenfeld, chief economist at CIBC Capital Markets,
said.
However, with inflation still above target, Shenfeld noted the bank wasn’t ready
to declare its job over in getting inflation to two per cent.
The bank warned it could hike interest rates again if “inflation expectations, wage
growth and corporate pricing behaviour” don’t moderate.
“Governing Council is concerned that progress towards price stability is slow and
inflationary risks have increased, and is prepared to raise the policy rate further if
needed,” the bank said.
The bank also noted that its preferred measures of core inflation remain above
target at 3.7 per cent and 3.8 per cent year over year.
“The bank is clearly frustrated by the achingly slow (but entirely predictable)
descent in inflation,” Douglas Porter, chief economist at BMO Economics, said.
Here’s what economists say about the Bank of Canada hold and where rates
could go from here.
Avery Shenfeld, CIBC Economics
“Signs of flagging demand were reason enough for the Bank of Canada to keep
its target rate on hold at five per cent today, but with inflation still well above
target, it’s not yet willing to give up on its warning that further hikes could still be
in the offing if prices don’t see enough cooling ahead.
Both decisions should come as no surprise to markets today. The statement cited
‘growing evidence that past interest rate increases are dampening economic
activity,’ and its 0.9 per cent forecast for 2024 growth (revised down from 1.2 per
cent) implies another few quarters of only sluggish gains ahead. But it also is
concerned about what it sees as ‘little downward momentum’ in core inflation.
It’s raised the near term inflation projection somewhat due to energy prices but
also due to the lack of core inflation progress, but the fact that it’s not hiking in
response to that suggests that it’s willing to show some patience while they wait
for economic slack to bring inflation down to two per cent in 2025.
Of interest, the nominal neutral rate is still seen as two to three per cent, while
the output gap has been revised down, and is seen as slightly negative as of Q3.
We expect that more of that momentum on inflation will show up as that slack
grows in subsequent quarters, and therefore don’t expect to see additional rate
hikes ahead, and room to ease as we approach mid-2024.”
Stephen Brown, Capital Economics
“Although the Bank of Canada maintained its tightening bias today, the rest of
the policy statement suggests that the bank is growing more confident that its
job is done. We continue to expect the bank to cut interest rates by much more
than markets are pricing in next year.
We see scope for headline inflation to return to the two per cent target in the
third quarter of 2024, a full year before the bank anticipates. That is partly
because, in contrast to the bank’s view that the economy will avoid recession, we
judge that we are already in the opening stages of one. We see scope for the
bank to begin cutting interest rates from around April 2024, taking the policy rate
back to three per cent by the end of the year.”
James Orlando, TD Economics
“Although the Bank of Canada has painted a clear picture for why it doesn’t need
to hike again, we expect its hawkish rhetoric to persist. It needs to maintain
current tight financial conditions in order to achieve its forecast slowdown. And
while markets are hesitant to build in another hike, the impact of the bank’s
rhetoric has resulted in a higher for longer path for its policy rate.”
Douglas Porter, BMO Economics
“We have long believed that fiver per cent rates are plenty high enough to
eventually quell underlying inflation, but it will take time and patience. Strong
wage growth and firm core inflation trends are going to test the bank’s patience.
However, all signs suggest that the economy is struggling mightily to grow —
despite the artificial sweetener of a surging population — with Q3 GDP about
flat, housing halting, consumer confidence crumbling, and the Business Outlook
Survey pointing south. Still, price and wage growth remain too fast for the BoC to
back off its hawkish rhetoric just yet. To act on that hawk talk would take either a
big rebound in growth, a renewed acceleration in inflation, or perhaps a
considerably weaker Canadian dollar. We assume none of those forces will weigh
in, and look for the bank to remain on hold deep into 2024

More news - anticipated rate pause to see what the next round of CPI and inflation news brings. Possible increase in October to some economists but they all feel that this is a very much wait and see.

Bank of Canada: Roundup of Economist Commentary Ahead of Monetary Policy Decision By Ketki Saxena Investing.com -- Tomorrow at 10:00 a.m ET, the Bank of Canada is set to deliver its monetary policy announcement. Economists are nearly unanimous in their calls for the Bank of Canada to stay on pause tomorrow, holding its overnight...

An important read for those trying to read and guess the market.

David Dodge: Canada 'not going back' to pre-pandemic interest rates - BNN Bloomberg Canada is not likely to return to interest rates between one and two per cent, according to a former Bank of Canada governor who also believes rate cuts will not come until late next year –at the earliest.

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An interesting read and look like 2025 to return to some sort of normal. Great new though for people that have fixed rates that purchased in 2020 and 2021

Another Bank of Canada rate hike likely in September: CIBC's Tal Another jump could be on the way – but it would mean rate cuts arrive sooner, economist says

Another prime rate increase all

Bank of Canada raises policy rate 25 basis points, continues quantitative tightening The Bank of Canada today increased its target for the overnight rate to 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening.

https://www.mpamag.com/ca/mortgage-industry/market-updates/boc-rate-cuts-in-2023-increasingly-unlikely-cibc/445288?tu=&utm_campaign=&utm_medium=20230509&_hsmi=257556441&_hsenc=p2ANqtz-_XtzyXtwmYxGWx4LbvLF5kolHgaGEvk3WjTKLKRWUyCjjqDIjWSaMQ5PV5xZ0B4PlQZpAm68tUnW73UF9oAEp8OL3nPg&utm_content=&utm_source=

Updated news friends

BoC rate cuts in 2023 increasingly unlikely: CIBC There's an 'open risk' of another increase, according to the banking giant

Update on rate thoughts

Could the Bank of Canada raise rates again in 2023? The door is still open to rate hikes after its latest decision, according to a prominent observer

For those of you looking to start or currently using a property for Air BnB, this is an important read.

Short-term accommodation licensing | City of London A “Short-term Accommodation” (STA) is defined as any rental accommodation provided for 29 days or less, in the City of London. These STAs require a business licence to advertise and operate.

Another rate increase. Less than I expected but expect another increase in December.

Bank of Canada increases policy interest rate by 50 basis points, continues quantitative tightening The Bank of Canada today increased its target for the overnight rate to 3¾%, with the Bank Rate at 4% and the deposit rate at 3¾%.

https://www.msn.com/en-ca/money/topstories/on-our-way-to-4-what-economists-say-about-bank-of-canada-s-statement/ar-AA11zixS?ocid=msedgdhp&pc=U531&cvid=2b05a7a10f244aefab24624e85efac78

On our way to 4%? What economists say about Bank of Canada's statement The Bank of Canada hiked interest rates 75 basis points on Wednesday, raising the key rate to 3.25 per cent, the fifth consecutive increase since it started tightening in March. The central bank also said more hikes are on the way to tame inflation that continues to be too widespread in the economy....

https://www.msn.com/en-ca/money/topstories/bank-of-canada-unveils-75-basis-point-hike-and-says-rates-will-need-to-go-higher-still/ar-AA11z3lo?ocid=msedgdhp&pc=U531&cvid=68f3284ce9b546be86afeb1985e1a0fc

Bank of Canada unveils 75-basis point hike and says rates will need to go higher still Bank of Canada unveils 75-basis point hike and says rates will need to go higher still

https://www.bnnbloomberg.ca/bmo-sees-canadian-rates-rising-above-4-if-housing-finds-a-floor-1.1814076

BMO sees Canadian rates rising above 4% if housing finds a floor - BNN Bloomberg The Bank of Canada may need to drive interest rates above four per cent partly because the housing market is “showing a flicker of life,” according to the Bank of Montreal.

An interesting read
https://www.msn.com/en-ca/money/finance-real-estate/no-choice-but-to-go-nuclear-bank-of-canada-issues-a-supersized-rate-hike/ar-AAZwP6S?ocid=msedgdhp&pc=U531&cvid=332c1e1c36204d46b6bedb87ba38f2ac

'No choice but to go nuclear': Bank of Canada issues a supersized rate hike With inflation running hot as a “four-alarm fire” — as the Bank of Montreal’s chief economist Douglas Porter so eloquently put it in a note to clients — the Bank of Canada is redoubling its efforts with a much more aggressive interest rate hike. While the overnight rate is the central bank...

https://globalnews.ca/news/8986132/bank-of-canada-interest-rate-july-2022/?utm_source=notification

Bank of Canada hikes key interest rate by full percentage point in surprise move - National | Globalnews.ca The Bank of Canada raised its key interest rate to 2.5 per cent on Wednesday with a hike of 100 basis points in an effort to rein in rampant inflation.