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 press release was published on the Bank of Canada website, CLICK HERE for the original article.

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.

The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand. The Bank projects global GDP growth of 2.9% this year, 2.3% in 2024 and 2.6% in 2025. While this global growth outlook is little changed from the July Monetary Policy Report (MPR), the composition has shifted, with the US economy proving stronger and economic activity in China weaker than expected. Growth in the euro area has slowed further. Inflation has been easing in most economies, as supply bottlenecks resolve and weaker demand relieves price pressures. However, with underlying inflation persisting, central banks continue to be vigilant. Oil prices are higher than was assumed in July, and the war in Israel and Gaza is a new source of geopolitical uncertainty.

In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures. Consumption has been subdued, with softer demand for housing, durable goods and many services. Weaker demand and higher borrowing costs are weighing on business investment. The surge in Canada’s population is easing labour market pressures in some sectors while adding to housing demand and consumption. In the labour market, recent job gains have been below labour force growth and job vacancies have continued to ease. However, the labour market remains on the tight side and wage pressures persist. Overall, a range of indicators suggest that supply and demand in the economy are now approaching balance.

After averaging 1% over the past year, economic growth is expected to continue to be weak for the next year before increasing in late 2024 and through 2025. The near-term weakness in growth reflects both the broadening impact of past increases in interest rates and slower foreign demand. The subsequent pickup is driven by household spending as well as stronger exports and business investment in response to improving foreign demand. Spending by governments contributes materially to growth over the forecast horizon. Overall, the Bank expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025.

CPI inflation has been volatile in recent months—2.8% in June, 4.0% in August, and 3.8% in September. Higher interest rates are moderating inflation in many goods that people buy on credit, and this is spreading to services. Food inflation is easing from very high rates. However, in addition to elevated mortgage interest costs, inflation in rent and other housing costs remains high. Near-term inflation expectations and corporate pricing behaviour are normalizing only gradually, and wages are still growing around 4% to 5%. The Bank’s preferred measures of core inflation show little downward momentum.

In the Bank’s October projection, CPI inflation is expected to average about 3½% through the middle of next year before gradually easing to 2% in 2025. Inflation returns to target about the same time as in the July projection, but the near-term path is higher because of energy prices and ongoing persistence in core inflation.

With clearer signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. However, 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. Governing Council wants to see downward momentum in core inflation, and continues to be focused 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 December 6, 2023. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 24, 2024.

This article was published on the Bank of Canada website.

“It ain’t good.”

That’s the assessment from Ron Butler of Butler Mortgage following the latest surge in bond yields this week, and as mortgage providers continue to raise mortgage rates.

On Tuesday, the Government of Canada 5-year bond yield jumped to an intraday high of 4.46%, but have since retreated to around 4.32% as of this writing. Over the past two weeks, yields have risen by over 30 basis points, or 0.30%.

Since bond yields typically lead fixed mortgage rate pricing, rates have been steadily on the rise. And rate-watchers say that’s likely to continue.

Butler told CMT he expects rates to rise another 20 bps or so by Friday.

Following this latest rise, by and large the only remaining discounted rates under 6% will be for default-insured 5-year fixeds, meaning those with a down payment of less than 20%. Conventional 5-year fixed mortgages will be right around 6%, or just a hair under, Butler notes.

Two-year fixed terms are now all in the 7% range, while 3-year terms are now starting to break the 7% mark, Butler added.

Higher-for-longer rate expectations driving latest increases

The biggest driver of this latest surge in yields is due to markets re-pricing the “higher-for-longer” expectation for interest rates, as well as expectations that Canada will avoid a serious recession, says Ryan Sims, a rate expert and mortgage broker with TMG The Mortgage Group.

In a recent email to clients, Sims explained the reason for falling bond prices, which is leading to higher yields, since bond prices and yields move inversely to one another.

Since the interest rates offered on newly issued bonds has been rising, it has made older bonds with lower rates less attractive. This means those older bonds need to be sold for a lower price in order to make the investment worthwhile for the purchaser.

“When yields (interest rates) are up, then the price of the bond is down,” Sims explained. “Bond prices have dropped quite substantially since March of 2022 and are on track for one of their worst track records since the late 1970s.”

While rising interest rates can be a problem, Sims noted that falling bond values can also be a concern for bond owners, with Canada’s big banks being among some of the largest holders of bonds.

“As bond prices drop, they must set aside more capital against dropping prices, which in turn leads to needing higher margin on funds they loan out on new mortgages—and around and around we go,” Sims wrote.

Could 5-year fixed mortgage rates reach 8%?

Sims had previously told CMT that 4% was a major resistance point for bond yields. Since they’ve broken through that, he said 4.50% is the next major hurdle.

“Here we are knocking on the door. If we break 4.50%, we could zoom to 5.00% very easily,” he said.

“If we see further highs on the Government of Canada 5 year bond yield, then who knows how high we go. It is completely possible, based on some technical charts, to see a 5-year uninsured mortgage around the 8% range,” Sims continued. “Although that would take another leg up in yields and higher risk pricing to achieve, but it is certainly possible. It’s not my base case at this point, but certainly in the realm of possibilities.”

While an 8% 5-year fixed-rate mortgage from a prime lender is only hypothetical at this point, today’s new borrowers and those switching lenders are in fact having to qualify at 8% (and higher) rates due to the mortgage stress test, which currently qualifies them at 200 percentage points above their contract rate.

The pain being felt at renewal

Over a third of mortgage holders have already been affected by higher interest rates, but by 2026 all mortgage holders will have seen their payments increase, according to the Bank of Canada.

Mortgage broker Dave Larock of Integrated Mortgage Planners told CMT recently that those with fixed-rate mortgages have so far largely avoided the pain of higher rates that’s been more prominently felt by variable-rate borrowers. But that’s now changing as about 1.2 million mortgages come up for renewal each year.

“They know higher payments are coming and it hangs over them like the sword of Damocles,” he said.

Data from Edge Realty Analytics show that the monthly mortgage payment required to purchase the average-priced home has risen to nearly $3,600 a month. That’s up 21% year-over-year and over 80% from two years ago.

This article was written for Canadian Mortgage Trends by:

Weaker-than-expected GDP data last week likely sealed the deal for a rate hold tomorrow by the Bank of Canada. But not all economists are convinced that this marks the end of the current rate-hike cycle.

Statistics Canada reported on Friday that second-quarter economic growth contracted by 0.2% compared to Q1, well down from the Bank of Canada’s 1.5% forecast for the quarter.

The surprising slowdown in economic growth, together with rising unemployment and easing inflation, firmed up the consensus expectation for a rate hold at tomorrow’s monetary policy meeting.

It also led to some suggesting we’re now reached the end of the current rate-hike cycle.

“The broad softening in the domestic economy will almost certainly move the BoC to the sidelines at next week’s rate decision after back-to-back hikes,” wrote BMO chief economist Douglas Porter. “Between the half-point rise in the unemployment rate, the marked slowing in GDP, and some cooling in core inflation, it now looks like rate hikes are over and done.”

But not everyone is convinced.

“I think [the Bank of Canada] should have comfort to deliver another rate hike at this point, but they will probably seek the cover of the latest GDP figures and defer a fuller forecast assessment to the October meeting by which point they will also have a lot more data,” wrote Scotiabank’s Derek Holt.

“Nevertheless, I’m unsure that rate hikes are done,” he continued. “The Governor has been clear that a protracted period of actual GDP growth under-performing potential GDP growth will be required in order to open up disinflationary slack in the economy. In plain language, he realizes he has to break a few things in order to achieve his inflation goals. I don’t think he has the confidence to this point to say that they are clearly on such a path.”

What the forecasters are saying…

On Inflation:

• National Bank: “Unfortunately, it’s on CPI inflation where policymakers will and should still feel uneasy. The re-acceleration in July will continue in August (due mostly to gas prices and base effects) and could push headline inflation close to 4%. The BoC doesn’t expect a particularly benign inflation environment in the near term, noting in July that price growth should “hover around 3% for the next year.” Governing Council will therefore tolerate some near-term upside pressures, particularly if it comes with weakness elsewhere in the economy. However, a stabilization above 3% would be problematic and could mean additional tightening.”

On future rate hikes:

• Desjardins: “There’s been sufficient weakness in the economy to warrant a pause on Wednesday, even with inflation data that will leave policymakers feeling uneasy. We expect that July’s hike will prove to be the last of this tightening cycle and recent data reinforce that view.”
• TD Economics: “We think [the economic slowdown] will continue, justifying our call for the BoC to remain on the sidelines for the rest of this year.” (Source)
• Scotiabank: “The Governor needs to be mindful that market conditions have eased of late and careful not to drive a further easing that could replay the rally in 5-year GoC bonds earlier this year that set up cheaper mortgages and drove a Spring housing boom.” (Source)

On GDP:

• TD Economics: “While federal government transfers in July may result in a short-term boost in the third quarter, we believe Canada has entered a stage of below trend economic growth. This should continue through the rest of this year, as the impact of high interest rates work through the economy to prevent another acceleration in demand.”

The latest Bank of Canada rate forecasts

The following are the latest interest rate and bond yield forecasts from the Big 6 banks, with any changes from their previous forecasts in parenthesis.

This article was written for Canadian Mortgage Trends by:

Rate hikes are definitely off the table

The Canadian economy weakened surprisingly more in the second quarter than the market and the Bank of Canada expected. Real GDP edged downward by a 0.2% annual rate in Q2. The consensus was looking for a 1.2% rise. The modest decline followed a downwardly revised 2.6% growth pace in Q1. (Originally, Q1 growth was posted at 3.1%.) According to the latest monthly data, growth dipped by 0.2% in June, and the advance estimate for economic growth in July was essentially unchanged. This implies that the third quarter got off to a weak start.

The Bank of Canada forecasted growth of 1.5% in Q2 and Q3 in its latest Monetary Policy Report released in July. The central bank is now justified in pausing interest rate hikes when it meets again on September 6th. Today’s report is consistent with the recent rise in unemployment. It suggests that excess demand is diminishing, even when accounting for such special dampening factors as the expansive wildfires and the BC port strike.

Some details of Q2 Growth

Housing investment fell 2.1% in Q2, the fifth consecutive quarterly decline, led by a sharp drop in new construction and renovations. No surprise, given the higher borrowing costs and lower demand for mortgage funds, as the BoC raised the overnight rate to 4.75% in Q2. Despite higher mortgage rates, home resale activity rose in Q2, posting the first increase since the last quarter of 2021.

Significantly, the growth in consumer spending slowed appreciably in Q2 and was revised downward in Q1.

Bottom Line

The weakness in today’s data release may be a harbinger of the peak in interest rates. Inflation is still an issue, but the 5% policy rate should be high enough to return inflation to its 2% target in the next year or so. As annual mortgage renewals peak in 2026, the increase in monthly payments will further slow economic activity and break the back of inflation.

The Bank of Canada will be slow to ease monetary policy, cutting rates only gradually–likely beginning in the middle of next year. In the meantime, the central bank will continue to assert its determination to do whatever it takes to achieve sustained disinflationary forces.

Today’s release of the US jobs report for August supports the view that the Canadian overnight rate has peaked at 5%. (The Canadian jobs report is due next Friday). Though the headline number of job gains in the US came in at a higher-than-expected 187,000, the unemployment rate rose to 3.8% as labour force participation picked up, growth in hourly wages was modest, and job gains in June and July were revised downward.

In Canada, 5-year bond yields have fallen to 3.83%, well below their recent peak shown in the chart below.

This article is from the Canadian Mortgage Trends website: https://www.canadianmortgagetrends.com/2023/06/another-week-another-rise-in-fixed-mortgage-rates-how-much-higher-could-they-go/

Another week and another round of fixed rate hikes have swept Canada’s mortgage market.

Mortgage lenders, including most of the big banks, have continued to hike their fixed mortgage rates following the recent surge in Government of Canada bond yields, which are used to price fixed-rate mortgages.

Several big banks, including BMO, CIBC and RBC, have hiked their posted rates by 15 to 40 basis points over the past week (one basis point is equivalent to 1/100th of a percentage point, or 0.01%).

Some of the biggest moves were seen in shorter 1- and 2-yr terms, according to data from MortgageLogic.news. Among national mortgage providers, average deep-discount rates for a 1-year term are now up to 6.25% (from 5.99% a week ago). And among the big banks, posted 2-year rates are up by about the same amount, averaging nearly 6.40% now.

Ron Butler of Butler Mortgage points out that bond yields are now up by over 100 basis points, or a full percentage point, from their March lows.

In previous weeks, rates with a 4-handle—that is, those in the 4% range—have largely disappeared. But the latest rounds of rate hikes are taking many fixed rates well into 6% and 7% territory.

Asked if 5-handle rates could be next to dry up, Butler said borrowers can expect 1- and 2-year rates in the 6% range, while 3- and 5-year rates should stay in the 5% range “for the time being.”

He adds that clients are continuing to express interest in both two and three-year terms.

Will rates continue to increase next week?

Given the surge in bond yields, Butler suspects lenders and brokerages will continue to raise fixed rates next week, potentially by as much as 30 bps.

And now that the 5-year yield has broken 3.60%, a key threshold, it still has its sights on the next important level of 4.00%, says Ryan Sims, a TMG The Mortgage Group broker and former investment banker.

“If we see a large drop today on the close, I think a lot of lenders will hold, but if we close up or even flat today, and next week is the same, then I think we could see some further fixed rate increases,” he told CMT.

“If we see the Canada 5-year bond hit the magical 4.00%, there is not a lot of resistance between 4.00% and 5.00%,” he added. “It’s not my prediction at all, but if we hit 4%, hold the 4%, and get any little bit of inflationary news, then it will be rocket fuel to the yield.”

Michael Gregory, Deputy Chief Economist at BMO Economics, notes that 2-year yields are up 43 bps from May’s average so far and are “poised to become the highest monthly mark in almost 15 years.”

He said the increase reflects “the prospects for a higher terminal policy rate and a ‘higher-for-longer’ theme to subsequent easing (presuming the economy steers clear of a deep recession).”

“Meanwhile, on both sides of the border, we look for the yield curve (2s-10s) to reach peak inversion for the cycle (on a monthly average basis) within the next month or two,” he added.

What’s driving the rate hikes?

The increase in Canadian bond yields came following recent rate hikes by other world central banks, as well as a rise in U.S. Treasury yields that came in response to hawkish comments from Federal Reserve Chair Jerome Powell.

Testifying before U.S. lawmakers, Powell suggested more policy tightening will be needed. At a separate event, Fed Governor Michelle Bowman said “additional policy rate increases” would be needed to bring inflation under control.

Last week, Powell also said that rate cuts would only be considered by the Fed once inflation comes down significantly. “It will be appropriate to cut rates at such time as inflation is coming down really significantly, and again, we’re talking about a couple years out,” he said.

U.S. markets are now pricing in a higher chance of two additional FOMC rate hikes this year., and any moves south of the border inevitably have an impact on Canadian interest rates.

This week also saw rate hikes by the Swiss National Bank, the Bank of England and Norges Bank. The latter two surprised markets with larger-than-expected increases of 50 bps.

Taken all together, the latest rate commentary and central bank moves have heightened market concerns about global inflation as well as the economic impact of higher-than-expected policy rates.

The latest Bank of Canada rate forecasts

Those with a variable rate are also expected to feel more pain from rising rates, potentially as soon as the Bank of Canada‘s next policy meeting on July 12.

Markets are pricing in a nearly 70% chance of an additional quarter-point rate hike next month, with those odds rising to 100% by September. All eyes will be on May inflation and employment figures, which could sway the BoC decision either way.

The following are the latest interest rate and bond yield forecasts from the Big 6 banks, with any changes from their previous forecasts in parenthesis.

The Bank of Canada holds rates steady again but maintains its commitment to 2% inflation

The Bank of Canada left the overnight policy rate at 4.5%, as expected, stating their view that inflation will hit 3% by mid-year and reach the 2% target by next year. They admit, however, that demand continues to exceed supply, wage gains are too high, and labour markets are still very tight. The Bank is also continuing its policy of quantitative tightening.

“Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth. While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued.”

The Bank expects consumption spending to moderate this year “as more households renew their mortgages at higher rates and restrictive monetary policy works its way through the economy more broadly.”

“Overall, GDP growth is projected to be weak through the remainder of this year before strengthening gradually next year. This implies the economy will move into excess supply in the second half of this year. The Bank now projects Canada’s economy to grow by 1.4% this year and 1.3% in 2024 before picking up to 2.5% in 2025”.

Most economists believe the Bank of Canada will hold the overnight rate at 4.5% for the remainder of this year and begin cutting interest rates in 2024. A few even think that rate cuts will begin late this year.

In contrast, the Fed hiked the overnight fed funds rate by 25 bps on March 22 despite the banking crisis and the expectation that credit conditions would tighten. This morning, the US released its March CPI report showing inflation has fallen to 5% year-over-year. Next Tuesday, April 18, Canada will do the same. The base year effect has depressed y/y inflation. Canada’s CPI will likely have a four-handle.

Fed officials next meet in early May, and it is widely expected that the Fed will continue to raise the policy rate while the Bank will continue the pause.

Due to the differences in our mortgage markets and the higher debt-to-income level in Canada, our economy is much more interest-sensitive. Despite these disparate expectations, the Canadian dollar has held up relatively well.

Bottom Line

The Bank of Canada upgraded its growth projections for this year in a new forecast, suggesting the odds of a soft landing have increased. This may preclude interest rate cuts this year.

“Governing Council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2% target,” the bank said.

The April Monetary Policy Report suggests strong Q1 growth resulted from substantial immigration. With the population proliferating, labour shortages should continue to decline, and inflation will fall to 3% later this year. The global growth backdrop is better than expected, though the Bank continues to look for a slowdown in the coming months, citing the lagged effects of rate hikes and the recent banking sector strains.

Governor Macklem said in the press conference that the economy needs cooler growth to corral inflation, although the Bank’s forecast does not include an outright recession.

The Bank will refrain from cutting rates this year. The Governor explicitly said at the press conference that market pricing of rate cuts later this year is not the most likely scenario.

The Bank of Canada holds rates steady even as the Fed promises to push higher

As expected, the central bank held the overnight rate at 4.5%, ending, for now, the eight consecutive rate increases over the past year. The Bank is also continuing its policy of quantitative tightening. This is the first pause among major central banks.

Economic growth ground to a halt in the fourth quarter of 2022, lower than the Bank projected. “With consumption, government spending and net exports all increasing, the weaker-than-expected GDP was largely because of a sizeable slowdown in inventory investment.” The surge in interest rates has markedly slowed housing activity. “Restrictive monetary policy continues to weigh on household spending, and business investment has weakened alongside slowing domestic and foreign demand.”

In contrast, the labour market remains very tight. “Employment growth has been surprisingly strong, the unemployment rate remains near historic lows, and job vacancies are elevated.” Wages continue to grow at 4%-to-5%, while productivity has declined.

“Inflation eased to 5.9% in January, reflecting lower price increases for energy, durable goods and some services. Price increases for food and shelter remain high, causing continued hardship for Canadians.” With weak economic growth for the next few quarters, the Bank of Canada expects pressure in product and labour markets to ease. The central bank believes this should moderate wage growth and increase competitive pressures, making it more difficult for businesses to pass on higher costs to consumers.

In sum, the statement suggests the Bank of Canada sees the economy evolving as expected in its January forecasts. “Overall, the latest data remains in line with the Bank’s expectation that CPI inflation will come down to around 3% in the middle of this year,” policymakers said.

However, year-over-year measures of core inflation ticked down to about 5%, and 3-month measures are around 3½%. Both will need to come down further, as will short-term inflation expectations, to return inflation to the 2% target.

Today’s press release says, “Governing Council will continue to assess economic developments and the impact of past interest rate increases and is prepared to increase the policy rate further if needed to return inflation to the 2% target. The Bank remains resolute in its commitment to restoring price stability for Canadians.”

Most economists believe the Bank of Canada will hold the overnight rate at 4.5% for the remainder of this year and begin cutting interest rates in 2024. A few even think that rate cuts will begin late this year.

In Congressional testimony yesterday and today, Federal Reserve Chair Jerome Powell said that the Fed might need to hike interest rates to higher levels and leave them there longer than the market expects. Today’s news of the Bank of Canada pause triggered a further dip in the Canadian dollar (see charts below).

Fed officials next meet on March 21-22, when they will update quarterly economic forecasts. In December, they saw rates peaking around 5.1% this year. Investors upped their bets that the Fed could raise interest rates by 50 basis points when it gathers later this month instead of continuing the quarter-point pace from the previous meeting. They also saw the Fed taking rates higher, projecting that the Fed’s policy benchmark will peak at around 5.6% this year.

Bottom Line

The widening divergence between the Bank of Canada and the Fed will trigger further declines in the Canadian dollar. This, in and of itself, raises the Canadian prices of commodities and imports from the US. This ups the ante for the Bank of Canada.

The Bank is scheduled to make its next announcement on the policy rate on April 12, just days before OSFI announces its next move to tighten mortgage-related regulations on federally supervised financial institutions.

To be sure, the Canadian economy is more interest-rate sensitive than the US.  Nevertheless, as Powell said, “Inflation is coming down, but it’s very high. Some part of the high inflation that we are experiencing is very likely related to a very tight labour market.”

If that is true for the US, it is likely true for Canada. I do not expect any rate cuts in Canada this year, and the jury is still out on whether the peak policy rate this cycle will be 4.5%.