BJK Financial Group Blog

As inflation continues to fall – to 2.5 % in July – economists expected to see the Bank of Canada (B0C) cut interest rates again to start off the month of September. They did. On Wednesday, the Bank of Canada announced another rate cut – the third since June.

And while it was generally expected, Governor Tiff Macklem also let Canadians know that the BoC would continue watching economic conditions in the months ahead and adjust rates as they deem necessary. That will be opportunities to see what the BoC is thinking twice more this year, in October and December.

Interest Rates React as Much as They Lead

As we hear again and again, the most significant tool monetary officials have for controlling inflation is the interest rate they set for banks and other financial institutions to follow. Up until Wednesday, the BoC Policy rate was sitting at 4.5%. Now it’s sitting at 4.25%

And to put that into perspective, the BoC Policy rate plummeted to .25% in late March of 2020 at the start of COVID and started to rise in 2022 to reach the kind of rates we are seeing now around the end of 2022.

Throughout that period, inflation rates fell to negative values in the first few months after COVID struck and then peaked in the summer of 2022. And as inflation rates skyrocketed, interest rates rose to try and tame it.

COVID was an economic as well as a health crisis for people around the world. While giving many of us an appreciation for the opportunity to work from home, it also devastated our ability to deliver products around the world. When things were at their worst we were all complaining about the double digit inflation we were seeing in the aisles of our local supermarkets. Now those prices have settled to a more acceptable rate of 2.1% in July.

The most disturbing part about the discussion of the inflation report by the BoC was the fact that the one sector still seeing relatively high inflation is what is referred to as the shelter price, still sitting at 5.7% for July, down from 6.3% in June.

That is not a good sign, considering how much time we spend talking about housing and the high cost of both buying and renting a place to live.

Rail Action Stemmed by the Federal Government

As we all know, it became difficult to get products delivered around the world during COVID. Last month it looked like we might see that happen once again as the railways locked out their workers. But in an effort to prevent that the federal government forced an end to the strike and sent the contract into binding arbitration. This has not been taken very well by the Teamsters and they have promised to take the government to court, claiming that the move by the Canada Industrial Relations Board set(s) a dangerous precedent that threatens workers' constitutional right to collective bargaining.

This is just one example of labour unrest that seems to be stemming from the aftermath of the COVID crisis we started out talking about. Airlines, both WestJet and Air Canada, have been in the news and I even came across a story about labour unrest at the Halifax harbour, earlier in August. I have no doubt there are many other examples.

And as Fall sets in, we can settle down

The passage of another Labour Day weekend and the return to school reminds us of the end of summer once again. And that passage often leads to renewal and re-evaluation. It is dropping interest rates or renewed school bells put you are in the mood for a review of your financial goals then feel free to reach out to discuss this or anything else in your financial plan. I would love to help. As usual, you can call me at (519) 279-0186 or send me a note at [email protected].

But while finding time for financial re-evaluations, keep in mind that you will need to also make for raking leaves, preparing for Thanksgiving, and digging your snow shovel out of the basement. (Oops, too early for that?)