Welcome to the latest episode of Make Money Count! The latest CPI numbers are in, and they’ve got everyone from economists to mortgage brokers talking. In this episode, Marcus breaks down what the CPI report means and whether we can expect a rate cut from the Bank of Canada.
CPI is Falling, But Core Inflation Still Lingers
At first glance, the CPI numbers looked promising. Canada’s overall inflation came in at 1.7%, which is comfortably below the 2% target set by the Bank of Canada. Sounds like a rate cut is imminent, right?
Not so fast.
While the headline inflation figure is encouraging, the Bank of Canada pays much closer attention to core CPI, which excludes volatile items like food and energy to give a more stable measure of inflation. And that core number, while slightly lower than last month, is still hovering near the top of the Bank’s acceptable range. So while things are cooling off, they’re not quite cold yet.
Economists Are Split—But The Pain Is Real
As soon as the CPI report dropped, economists across the board began updating their forecasts. A few are still hesitant, but the growing consensus is that we’re inching closer to a 25 basis point rate cut in the upcoming July 30th Bank of Canada announcement. Marcus agrees with this view, but not because inflation is totally under control. It’s because the rest of the economy is flashing warning signs.
Let’s break it down:
- Consumer spending is tightening
- Confidence is low
- Unemployment is rising, especially among recent grads (close to 15% in some cases)
- Real estate transactions are stalling, and listings are being canceled in record numbers
In short, the economy is in pain.
Why the Bank of Canada Should Cut Rates
If inflation is not completely tamed, why should the Bank of Canada risk a rate cut? Because doing nothing might be worse.
We’re already in a recession-like environment, and without some form of monetary relief, the cracks in the economy could become fractures. Borrowing is expensive, confidence is low, and qualified Canadians are struggling to find jobs. Cutting rates—even by just 0.25%—won’t fix everything, but it could send a crucial signal:
“We hear you. And we’re responding.”
That signal alone could help stabilize the housing market, restore some consumer confidence, and show that the Bank is not tone-deaf to the challenges faced by everyday Canadians.
Real Estate Market on Thin Ice
Let’s talk housing. Real estate has always been the backbone of the Canadian economy, and right now, that backbone is under stress.
Data shows:
- Listing cancellations are at a 10–15-year high
- Many sellers are “testing” the market, then delisting due to a lack of interest
- Sales volume is extremely low, even though home values appear stable
- If volume picks up again without a drop in interest rates, prices could fall fast
And here’s the scary part: if interest rates stay high and more sellers feel the pressure, we could be looking at a wave of desperate listings, leading to a sharp decline in home values.
So, What Happens Next?
According to Marcus’s prediction, we’ll likely see:
- A 25 basis point rate cut on July 30th
- No drastic drop in real estate prices (yet)
- A signal from the Bank of Canada that they’re willing to act, even cautiously
But it’s not a done deal. As of today, the market assigns just a 28% probability of a rate cut in July. That said, more data is coming in the weeks ahead, on unemployment, consumer confidence, and housing, that could tip the scales.
We’re at a crossroads.
Inflation is cooling, but not gone. The economy is softening, and people are feeling the pinch. A 0.25% rate cut won’t change everything overnight—but it might be exactly the kind of signal Canadians need to believe in a recovery.
Stay tuned. July 30th could be a turning point.
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