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Bank of Canada – Steady interest rates build consumer confidence

Clinton Wilkins chats with Todd Veinotte on City News 95.7 about the latest Bank of Canada update, including its hold on interest rates, the impact on the market and bringing inflation back in line.

The Bank of Canada holds interest rates steady.

Todd Veinotte 00:00
Some pretty big news when it comes to the Bank of Canada. For the first time since last March, the Bank of Canada is expected to announce today, or that it has announced that it’s holding the line on this trend setting interest rates. And finally, some good news for people who have variable mortgages and loans, eh Clinton Wilkins, our mortgage guru?

Clinton Wilkins 00:18
I think it’s great news, Todd. You know, I think it’s certainly going to build some more consumer confidence. And I think it just speaks to the work that they’ve done the last 12 months is now starting to pay off, as you know, inflation numbers in January, were showing a downward trend. And I think now what we need to do is wait and see these increases and what’s going to happen with inflation in the next several months.

Todd Veinotte 00:42
Yeah, absolutely. So I guess if inflation continues to ease off, and that’s what we’re all hoping happens, then these interest rates will remain stable. I don’t think we could look for a cut anytime soon, though. What are your thoughts on that?

The impact on the real estate market in Canada

Clinton Wilkins 00:56
I think the rates are going to be high all year, Todd. You know, I think the next announcement, it’s on April 12, I expect there’s going to be another hold. Inflation is still high in terms of housing costs, and food costs. So those are two things that the Bank of Canada is really trying to obviously soften. And you know, where the rates are, we may see another bump, depending on what’s happening with inflation. Likely, I think we’ve kind of leveled things off now, which I think is good news for consumers, we still know the rates are high, but at least you can plan you can you can make some decisions. And that’s going to have an impact here, I think in our real estate market as well, in Halifax, you know, spring market is typically the busiest market of the year. And there certainly were some concerns. Obviously, this year with the rates being high, how that’s going to have an impact. But I think there’s going to be more confidence now, knowing that things at least have balanced out a little bit.

Interest Rates in the United States VS Canada

Todd Veinotte 01:54
Alright so, what about what happens in the United States, because this is obviously something that they’re dealing with in the US as well, is decisions when it comes to the interest rate. Does that have any effect on decision makers here in this country? Do you think?

Clinton Wilkins 02:05
I think it definitely does have an impact, you know, they look and see what the trends are. And what happens in the US, you know, trickles down to what happens here in Canada or trickles up, I should say, really. And historically, what happens in the US, they need to have double the amount of increases to have the same amount of economic impact that an increase would happen here in Canada. So typically, when we see the Fed increase, the Bank of Canada will typically increase about half of how much the Fed would, we’ve had some good success in bringing the installation in line, I think their inflation was maybe even more challenging than it was here in Canada. So they definitely need to go with a more aggressive, you know, increase schedule, to you know, bring inflation back to where it needs to be.

Bringing inflation back in line

Todd Veinotte 02:06
Alright, to summarize, no interest rate increase this time, you feel as though we could look for that next time, although you’re going to summarize, you feel rates will stay high for about a year or so around where they’re at.

Clinton Wilkins 03:05
You know what, I think they’re going to be high all year, Todd. And really, the mandate from the Bank of Canada is to protect, you know, the Canadian economy and to bring inflation back in line. You know, there’s certainly some work to do here. And I feel like we’re going to have some pain. The challenge is that as we slow the economy, with these rates being high, there will be a recession on the horizon. You know, there’s already some indications that there’s cracks in the economy that things are starting to slow. It’s good news, in terms of what’s happening in the rate environment, but maybe not great news for everyone in terms of what’s going on in the rest of the market in terms of, you know, jobs, we’re going to be keeping a very close eye on that and obviously, we’re going to be waiting for the job numbers to come out. They were very high at the beginning of the year. I’m personally not convinced that there were a lot of new jobs added Todd. I think there was a lot of lateral moves. And I think it will certainly come to fruition and we’re gonna keep on keeping an eye on things going forward.

Todd Veinotte 04:07
Great stuff Clinton always appreciate your insight, pal. Thank you.

Clinton Wilkins 04:10
Thanks. Thanks.

Todd Veinotte 04:11
All right, you got it. You got it. Clinton Wilkins, our mortgage guru.