On June 4, the Bank of Canada kept its overnight rate at 2.75%, citing U.S.–Canada trade turbulence and stubborn core inflation—despite a cool April headline Consumer Price Index of 1.7%.
Why the pause?
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U.S. Tariffs Drama: Canada is still dealing with shifting steel and aluminum duties—a wildcard impacting supply prices .
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Economic Push & Pulls: Alert: Q1 surprised with 2.2% growth, partly from inventory stockpiles ahead of tariffs, yet underlying domestic demand—like business investment and consumer activity—is sluggish .
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Core Inflation Holding Firm: While headline inflation eased, core CPI remains above target—so no cut-first approach .
So… are cuts coming?
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Economists widely expect 2–3 cuts by year‑end, likely bringing the rate down to ~2.25–2.50% by Q4.
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TD Economics forecasts two cuts this year, targeting 2.25%, assuming tariff headwinds ease and job losses continue.
Mortgage Market Snapshot
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Fixed rates remain steady—big moves unlikely until bond yields shift.
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Variable rates are trending down; expect around 4% mid‑2025—still above historical lows, but dropping.
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GST break alert: New federal incentive waives GST on new homes up to $1M for first‑time buyers—potential savings of up to $50,000, easing monthly costs.
Smart Moves Right Now
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Renewal strategy: Short‑term fixed vs. variable? With cuts likely, variable may win—but if rates surge, fixed shields you.
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First‑time buyers: Look into the GST exemption—builds significant savings into your rate equation.
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Stay alert: The next BoC meeting is July 30, with the Monetary Policy Report due—it’s the next checkpoint for direction.
Bottom Line
The BoC is riding a tightrope—balancing trade‑related inflation with a slowing economy. Expect a couple of rate cuts later this year, giving borrowers some breathing room. But in the meantime: no change, and no sugar-coating—the outlook hinges on trade, inflation, and jobs.
Need help locking in the best mortgage setup amid this uncertainty? I can help—reach out any time.