Today's post is brought to us courtesy of First National Financial. I thought it was extremely relevant for those clients who are anxiously watching their variable rate mortgages, wondering when rates are going to change.

Jun 26, 2018
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First National Financial LP

Over the past few months market watchers thought they had a lock on the next interest rate move by the Bank of Canada.  Now some uncertainty is creeping back in.

After the last setting passed with no change the Bank’s accompanying statement said it would take a “gradual” approach to interest rate adjustments – changing-out the word “cautious” – based on the data.  Most observers took that to mean we would see a quarter-point rate hike at the July 11th setting.  But the data has thrown that into doubt, in the minds of many.

The latest inflation and retail sales figures have come in weaker than expected.  May inflation was 2.2%, virtually unchanged from April.  While that is above the central bank’s stated target of 2% it is in line with the BoC’s projections, and it is not enough to justify a rate increase to keep it in check.  It is also markedly below the 2.6% inflation rate that had been forecast for the month.

Retail sales for April dipped 1.4%.  Bad weather across the country is getting the blame.

A third factor, continuing uncertainty surrounding trade, remains a perpetual problem for the Bank of Canada.  Heightened tensions between Canada and the United States, and the growing possibility of a trade war make it increasingly difficult to make economic accurate forecasts.