Past Peak Inflation? Inflation Falls to 6.9%
It was just announced that inflation in Canada cooled in September to 6.9% from a high of 8.1% in June - are we past peak inflation?
What I know:
The Bank of Canada will increase interest rates again on October 26, likely by 0.75%
The largest contributing factor to high inflation is the high price of oil caused by the war in Ukraine
The economy is slowing as interest rates start to have an effect and the buying power of people and businesses is starting to be impacted
For the past 25 years, interest rate increases have been short-lived, plateau and then decrease to lower rates than where they started
What I think:
The Bank of Canada will do two more interest rates increases because they have to get inflation under control, then increases are over
The quickest interest rate increases in HISTORY will continue to negatively affect the economy and inflation will more aggressively come down
Lower inflation will be persistent until the war in Ukraine is over and China full opens after it’s zero-Covid policy
Canada will go into a recession in mid-late 2023
Interest rates will start coming down in late 2023/early 2024
Don’t expect fixed mortgage rates below 2% again but rates -4% is definitely possible
What I Recommend:
If you locked into a fixed rate mortgage, then great you will likely benefit from it.
If you haven’t, go variable to benefit from rates coming down over the next years.
With inflation at historic highs, the replacement costs of housing are only going up. If you don’t think housing prices will be higher in 5-10 years, then you should not be investing in real estate. If you believe they will be higher, now is one of the best times to be buying – don’t try to time the bottom of the market - prices may never be lower.