In August, inflation in Canada hits the central bank's 2% target.
Canada’s annual inflation rate reached the central bank’s 2% target in August, marking the lowest level since February 2021, according to data released on Tuesday. Core price measures, closely monitored by economists, also dropped to their lowest point in 40 months, with consumer prices falling 0.2% month-over-month, as reported by Statistics Canada. Reuters' analysts had predicted that the Consumer Price Index (CPI) would decline to 2.1% from July's 2.5% annually, while remaining stable on a monthly basis. Following the news, the Canadian dollar weakened, dropping 0.2% to C$1.1361 against the U.S. dollar, equivalent to 73.45 U.S. cents. This easing in inflation was largely driven by decreases in gasoline, telephone services, and clothing and footwear prices, while shelter costs, including mortgage interest and rents, continued to rise, albeit at a slower rate. Earlier this month, Bank of Canada Governor Tiff Macklem expressed concern over the risk of inflation falling below the target as economic growth remains sluggish. The central bank has already lowered its key interest rate three times consecutively, cutting it by a total of 75 basis points to 4.25%. Financial markets are now expecting two more 25-basis-point rate cuts in 2024’s final policy meetings, with a 50-basis-point cut now seen as 47.5% likely, up from 46% before the latest data. CIBC senior economist Andrew Grantham noted in a report that inflation is no longer a major concern and that the Bank of Canada should focus on boosting the economy and addressing rising unemployment. He added that further interest rate cuts totaling 200 basis points could occur by mid-next year. The Bank of Canada had forecast inflation at 2.6% for this year, falling to 2.4% in 2025 before hitting its 1-3% target range in 2026. In August, CPI-median, a measure of the middle price change in the CPI basket, slowed to 2.3% from July’s 2.4%, while CPI-trim, which excludes volatile price items, cooled to 2.4% from 2.7%. Gasoline prices fell 5.1%, and clothing and footwear prices dropped 4.4%, contributing to the inflation decline. However, shelter costs, which make up almost 30% of the CPI basket, rose 5.2% in August, down from 5.7% in July, led by mortgage interest costs and rents. Mortgage interest costs slowed to 18.8% from July’s 21%, while rents increased by 8.9% compared to 8.5%. Despite the cooling inflation, mortgage interest and rent costs remained the biggest drivers of the CPI increase in August, according to Statistics Canada.
Bank of Canada cuts key interest rate to 4.25%
On Wednesday, the Bank of Canada implemented its third consecutive interest rate cut, lowering the key lending rate to 4.25 per cent. This quarter-point reduction was largely anticipated by experts due to ongoing economic weakness and declining inflation. Governor Tiff Macklem explained that the central bank's decision was influenced by two main factors. “Firstly, both headline and core inflation have continued to decline as predicted,” Macklem stated. “Secondly, as inflation nears its target, we need to see economic growth strengthen to reduce economic slack, ensuring inflation sustainably returns to the two per cent target.” Although the Bank of Canada acknowledged stronger-than-expected economic growth in the second quarter, preliminary data for June and July indicate a slowdown in economic activity. “It’s often said that victory favors the bold, but the Bank of Canada chose a more cautious approach with another quarter-point rate cut, keeping rates higher than where they may need to be to stimulate the economy as inflation subsides,” commented CIBC chief economist Avery Shenfeld. Shenfeld noted that while there was some speculation about a half-percentage-point cut, the central bank opted for a balanced strategy. Macklem reiterated that if inflation continues to decrease as expected, additional rate cuts are likely. Canada’s annual inflation rate has remained below three per cent for several months, reaching 2.5 per cent in July. With the inflation target within reach, Macklem has emphasized the need to balance potential risks. “There is a possibility that inflationary pressures could be stronger than anticipated,” Macklem warned. “However, with inflation nearing the target, we must also be vigilant against the risk of the economy weakening too much, causing inflation to fall excessively.”
Essential Tips for First-Time Home Buyers: A Guide to Your Dream Home
Buying your first home is a significant milestone, filled with excitement and anticipation. However, the process can also be overwhelming without the right guidance. As a first-time home buyer, it’s crucial to be well-prepared and informed. To help you on this journey, we’ve compiled a list of essential tips to make your home-buying experience as smooth and successful as possible. 1. **Understand Your Budget and Finances** Before you start house hunting, it’s crucial to understand your financial situation. Determine how much you can afford to spend on a home by evaluating your income, expenses, savings, and debts. A good rule of thumb is that your monthly housing costs (including mortgage, taxes, and insurance) should not exceed 28-30% of your gross monthly income. **Tip:** Use online mortgage calculators to get a ballpark figure of your potential monthly mortgage payments. Don’t forget to factor in additional costs like property taxes, homeowners insurance, and maintenance. 2. **Get Pre-Approved for a Mortgage** A mortgage pre-approval is a letter from a lender stating how much you’re eligible to borrow. This process involves a thorough check of your financial background, credit score, and income. Getting pre-approved shows sellers that you’re a serious buyer and can give you an edge in a competitive market. **Tip:** Shop around and compare rates from different lenders to find the best deal. Even a slight difference in interest rates can save you thousands over the life of your loan. 3. **Define Your Needs and Wants** Make a list of what you need and want in a home. Needs are non-negotiables (like the number of bedrooms, location, or proximity to work), while wants are nice-to-haves (like a pool or a large backyard). Understanding these will help you focus on properties that meet your requirements and avoid getting distracted by features that are less important. **Tip:** Be prepared to compromise. It’s rare to find a home that checks every box, so knowing your priorities can help you make decisions more easily. 4. **Research Neighborhoods and Locations** The location of your home is just as important as the home itself. Research different neighborhoods to find one that suits your lifestyle and needs. Consider factors like school districts, safety, amenities, commute times, and future development plans. **Tip:** Visit neighborhoods at different times of the day and week to get a sense of the area’s vibe and noise levels. Talk to local residents if possible to gather insights. 5. **Work with a Reliable Real Estate Agent** A knowledgeable real estate agent can be an invaluable asset, guiding you through the entire home-buying process. They can help you find homes that match your criteria, negotiate on your behalf, and handle the complex paperwork. **Tip:** Choose an agent who is experienced, knows the local market, and understands your needs. Don’t hesitate to ask for references or read online reviews. 6. **Be Prepared for Additional Costs** The purchase price of the home isn’t the only cost you’ll need to consider. Be prepared for closing costs, which can include fees for appraisals, inspections, title insurance, and attorney fees. These typically range from 2% to 5% of the home’s purchase price. Additionally, set aside money for moving expenses, furnishings, and any immediate repairs or renovations. **Tip:** Create a separate savings fund for unexpected expenses that may arise during or after the home-buying process. 7. **Don’t Skip the Home Inspection** A home inspection is a critical step that shouldn’t be overlooked. It helps identify potential issues with the property, such as structural problems, faulty wiring, or plumbing issues. A thorough inspection can save you from costly repairs down the line. **Tip:** Attend the inspection and ask the inspector questions. Use the inspection report to negotiate repairs or a lower purchase price if necessary. 8. **Be Patient and Stay Focused** Buying a home is a significant decision, and it’s essential not to rush into it. The perfect home might not come along immediately, and that’s okay. Be patient and keep your long-term goals in mind. **Tip:** Keep your emotions in check and avoid making impulsive decisions. It’s easy to get attached to a property, but make sure it aligns with your budget and needs. 9. **Review and Understand Your Contract** Before signing any documents, ensure you thoroughly understand the terms and conditions of the purchase agreement. Don’t hesitate to ask your real estate agent or attorney to clarify anything that’s unclear. Make sure all agreed-upon terms, like repairs or contingencies, are included in the contract. **Tip:** Pay attention to deadlines for inspections, appraisals, and other contingencies. Missing these could put your deposit at risk. 10. **Think Long-Term** When buying a home, consider how long you plan to stay. This decision can impact the type of mortgage you choose and the features you prioritize. A home that fits your current lifestyle might not suit your needs in a few years if you plan to start a family or change jobs. **Tip:** Look for a home that offers flexibility and room for growth. This can help you avoid the costs and hassle of moving sooner than expected. Conclusion Buying your first home is an exciting journey, and with careful planning and preparation, you can make it a successful and rewarding experience. Remember, the right home is out there, and by following these tips, you’ll be well on your way to finding it. Happy house hunting!
Canada inflation cools to 40-month low of 2.5% in July
Canada's annual inflation rate dropped to a 40-month low of 2.5% in July, aligning with forecasts, while core inflation indicators also eased, according to data released on Tuesday. This trend supports the Bank of Canada's plan to reduce interest rates again in September. Money markets anticipate another 25 basis point rate cut at the Bank's upcoming announcement on September 4, with a total of three cuts expected this year. Most economists agree on a similar rate reduction path, which could lower the benchmark rate to 3.75% by the end of the year. Andrew Grantham, senior economist at CIBC Capital Markets, noted, "With inflationary pressures easing but concerns about a weakening labor market growing, we still predict three more 25bp cuts by the Bank of Canada at the remaining meetings this year." The central bank has already lowered its policy rate at the last two consecutive meetings, bringing it down to 4.5% from 5% before the first cut. In its most recent monetary policy announcement, the focus shifted from solely controlling inflation to also stimulating the economy. The inflation rate is now closer to the Bank of Canada's 2% target than at any time since March 2021, when inflation was 2.2% as prices began to rise about a year into the pandemic. Following the CPI report, the Canadian dollar gave up some gains, trading up 0.04% to 1.3628 against the U.S. dollar, or 73.38 U.S. cents. Yields on two-year Canadian government bonds fell by 3.5 basis points to 3.416%. Two of the Bank of Canada's preferred measures of underlying inflation, CPI-median and CPI-trim, slowed to their weakest rates since April 2021. CPI-median decreased to 2.4% from 2.6% in June, while CPI-trim dropped to 2.7% from 2.8%. The overall decline in July's inflation was primarily due to lower prices for travel tours, passenger vehicles, and electricity, according to the statistics agency. Specifically, travel tour prices fell by 2.8% annually in July after a 7.4% increase in the previous month, and passenger vehicle prices declined at their fastest pace since November 2012. Goods prices rose by 0.3% annually, the same as in June, while services inflation slowed to 4.4% from 4.8%.
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