New data from Statistics Canada shows that the annual inflation rate in the country has dropped to a three-year low of 2.7 percent. This is undoubtedly great news for all Canadians and could signal a potential decrease in the key interest rate by the Bank of Canada. Where did the decline occur? It is primarily due to lower prices for food, services, and durable goods, which have caused the slowdown in inflation. The rise in gasoline prices has somewhat slowed this process.
However, one of the main factors contributing significantly to the overall level of inflation in Canada is, surprisingly, credit rates. If we look at the Consumer Price Index (CPI) excluding housing, which is the primary component most affected by credit rate changes, we see that inflation has dropped to 1.1 percent. In fact, this is below the lower boundary of the range.
Now the main question that concerns all of us: Will the Bank of Canada lower the interest rate at the upcoming session on June 5? It's not so simple. The decline in inflation is certainly an argument in favor of a possible reduction in Canada's key lending rate, but there are still "nuances" that may prevent this from happening in June.
The first is the still high inflation in the United States. The second is that the Governor of the Bank of Canada, Tiff Macklem, recently noted in his briefing that the Bank of Canada wants to see a period of sustained inflation decline before moving to a policy of lowering interest rates.
Therefore, I am inclined to think that the key lending rate will not be reduced in June.
What should you do if you have a mortgage and the time for refinancing is approaching, causing your payment to jump from a comfortable 2-3 thousand Canadian dollars to 5 thousand? (This is just an example; the figures may vary).
There is no definitive recipe here. Call me, and my team and I will definitely come up with something. 905-909-8888