Canadian Inflation Falls to 5.2%
Inflation in Canada for February fell for the 8th month in a row to 5.2% from a high of 8.1% in June 2022. I think there is a 0% chance that the Bank of Canada will raise interest rates at their next meeting in April:
1) Inflation is already responding to higher interest rates > no need to increase further and risk damaging the economy
2) Stable interest rates mean inflation related to housing will not increase > a major cause of recent inflationary pressure is not going up
3) Oil has fallen from a high of $120/barrel in June 2022 to $71 today > this was the single biggest cause of inflation to begin with.
4) Billion Dollar Banks are collapsing: Silicon Valley Bank, Credit Suisse, Silvergate Bank, Signature Bank > ensuring global economic stability is even more important than reducing inflation
The cost of food is the one area that continues to go up but this is heavily influenced by the price of oil and should start to ease now as well.
Inflationary pressures continue to be high in the US and UK, so we're not out of the woods yet, but I strongly believe that the worst is over and we are seeing interest rates starting to come down. When I'm doing my investment analysis for real estate deals, I'm now using mortgage rates at 4%, and I think this is conservative for where they will be in years' time.
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