Inflation moved up again!
April inflation numbers are out for Canada. Inflation increased to 4.4% from March’s 4.1%. This is the first time the rate of inflation has increased since last June last year.
What this means for interest rates:
1. 5 year bond yields are up – this puts pressure on fixed interest rates to rise.
2. The market is now changing the first rate cut expectations from the end of 2023 to some time in 2024.
3. If inflation continues to move up, we may see rate increases down the road.
Other factors to consider:
The leading causes of inflation recently are a 6.4% jump in gas prices, higher mortgage costs (as more people come up for renewal every month) and higher rent costs. The Bank of Canada’s goal inflation rate is 2% we are down to 4.4% from the peak last year of 8.1%.
Are we going to see another set of large rate increases? I personally doubt it. We may see a small increase down the road or a delay in any decreases until inflation has come down considerably.