Inflation Is Rising. Rates Aren't Dropping. What’s Next?

Added: 2026-06-07

[00:00:00]Hey everyone, welcome to Make Money Count. We've had some pre-show laughs today, but we're going to talk about what we think will likely happen on June 10th with the Bank of Canada meeting.

[00:00:11]>> Bank of Canada meeting on June 10th.

[00:00:13]>> Yeah.

[00:00:14]>> And all like it used to be that we were thinking like uh like could be a rate cut.

[00:00:23]Could also be a rate hike.

[00:00:24]>> Mhm.

[00:00:25]>> And now we're thinking oh, it could be a rate hold or it could be a rate hike.

[00:00:32]>> Right.

[00:00:32]>> the direction we're going in.

[00:00:34]>> Mhm.

[00:00:36]>> basically the longer the Strait of Hormuz stays closed, the longer that Trump furthers the skirmish. He doesn't call it a war, right? He furthers his war um with Iran and energy markets stay frozen, oil prices go up, inflation becomes a threat. We have a problem.

[00:01:00]>> Yeah.

[00:01:00]>> The longer that happens, the more likely inflation sticks around for longer, less likely that the central banks can ignore it.

[00:01:07]>> A few days ago it seemed like it was going to be over.

[00:01:10]>> Yeah.

[00:01:11]>> And then my stocks went >> Yeah, just like it's the game, right?

[00:01:14]It's like playing a game. It's like you know, anyways.

[00:01:18]Uh what I would like to do is I want to kind of like there are some key numbers that are going to affect interest rates in Canada and I put a little chart together and we can probably put it on the screen for our viewers, but I've got it up there for you if you can see it.

[00:01:32]>> I can see it.

[00:01:32]>> Okay. So, Bank of Canada policy rate is currently 2.25.

[00:01:36]They held on April the 29th. June 10th is its upcoming is their upcoming meeting.

[00:01:41]>> Mhm.

[00:01:41]>> 97% chance that we're going to see a rate hold on the 10th. That's like across the markets, everyone that's participating in the market based on pricing for the overnight rate, we're at 97%.

[00:01:54]Uh Canada's GDP, this was taking like a lot of the news headlines recently that we are in a technical recession right now. I mean, it feels like we've been in a recession for a while.

[00:02:04]>> Yeah, yeah, yeah.

[00:02:05]>> Yeah. But, GDP negative growth, -0.1%.

[00:02:09]Uh clearly the economy has stalled out.

[00:02:12]There's reports come We've I've read some reports from National Bank and from TD highlighting how stalled out the economy is and how we're operating below capacity.

[00:02:22]Um and obviously the fact that there's that new tariff proposal >> Right.

[00:02:29]>> 10% >> Mhm. Mhm.

[00:02:30]>> uh coming from the United States, which again is just like threats coming >> Yeah, yeah. Of course. Of course.

[00:02:37]>> Um and even Carney said it's unlikely to impact much of the trade that we do with them because it's real like basically he's saying that Trump is saying that um the goods that we're importing into the United States uh are being produced by forced labor camps in China or like we're they're contributing. So, >> Right.

[00:02:56]>> goods that we're receiving we're inputting into goods and then sending them to the United States. Which >> Right.

[00:03:02]>> Like I just can't see that. Canada has its own very strict guidelines for goods that enter into the country. Uh CPI number, we remember the April number came in at 2.8%. We do not like that number. Uh that number's going to go higher. So, the May number, which we're going to get shortly, will be higher and scarier.

[00:03:22]>> Which is why no central bank governor in their right mind would cut interest rates >> Yeah.

[00:03:28]>> in an environment like this cuz you have like a you have only downside risk because inflation's going to come in hotter.

[00:03:35]>> Mhm.

[00:03:35]>> So, you can go in cut rates by 25 basis points because we're in a recession and the economy's stalled out.

[00:03:41]But, then you're going to get smacked with an inflation print that's 3% and it's only going to get worse because you cut those rates 25 basis points.

[00:03:49]>> Right.

[00:03:49]>> So, we're not going to see a rate cut.

[00:03:52]5-year Government of Canada bond yield is at 3.06% today. The 3-years moved down even more.

[00:03:59]That's at 2.87%.

[00:04:02]Those are pretty tight. Uh again, um we're big fans of the 3-year fixed right now. If you're going to lock something in, and we can get you one at like 3.99%.

[00:04:13]Um which I think is like with all of the uncertainty, the one thing I can I can be pretty sure about is 3 years from now rates uh aren't going to be higher.

[00:04:25]>> Right.

[00:04:26]>> Um but again, it's 3 years, so it's a long time. And if they are higher, if it if they are higher, it uh probably means that our economy's picked up significantly.

[00:04:37]>> Or that Trump got reelected and the war's still happening.

[00:04:41]>> If Trump was in power again, it wouldn't be election.

[00:04:44]>> Right, right, right.

[00:04:45]>> Yeah, it'd be something else.

[00:04:47]Something that I don't think anybody wants to see.

[00:04:48]>> No, no.

[00:04:50]>> Um uh US CPI extremely inflationary and heading in a more inflationary direction. They're at 3.8%.

[00:05:04]Um and they're thinking it's going to be above 4% in May. That's from a TD report that I just read.

[00:05:10]Um and then we mentioned it, but that new tariff proposal adding 10% onto our tariffs.

[00:05:18]And then finally, the connect straight for the 3-year, just so that everybody can see it at 3.99. So, if you're shopping for an interest rate >> That's our current offer.

[00:05:26]>> Yeah, for a 5-year or a 3-year fixed, or a 5-year fixed, or a variable, whatever, call us.

[00:05:31]Call someone else, tell them you got this rate from us, and you'll get a better rate, or you know, maybe do a deal with us.

[00:05:35]>> Yeah.

[00:05:36]>> Uh yeah, sorry.

[00:05:37]>> The whoever takes over, or like if if Trump doesn't Putin himself in power again, um you like that?

[00:05:44]>> Yeah, I like that. It's a little play on words.

[00:05:46]>> Um whoever takes over from him is going to have a hell of a mess to clean up.

[00:05:51]>> For sure they're going to have a mess to clean up.

[00:05:53]But the other thing we should keep in mind is it's an easy position to be in to come in after a bully was in charge of a country.

[00:06:03]>> Yeah, yeah, yeah.

[00:06:04]>> And I don't expect that they're going to give up a lot of what they've taken in that in this period. So [clears throat] it would be I would have a hard time thinking that our relationship with the United States is going to pivot immediately upon someone else coming into power. It It isn't It could It's going to be warmer and people are like there's going to be more dialogue, but if you've made a lot of like if you've taken a lot from another country over the previous administration, you're not just going to step in and relinquish all that ground that you've gained.

[00:06:42]>> Mhm.

[00:06:42]>> So I don't know how much better it's going to be, but I hope I certainly hope it will be. June 10th is [clears throat] our meeting. We're at 2.25% on the overnight rate right now. We know Strait of Hormuz is a problem. We know CPI is up to 2.8%. We know the Bank of Canada sees CPI going to 3% and then easing back down to 2% in 2027. I don't know how they see that because if oil prices stay elevated through the rest of this year, which like wars, it seems like anybody that ever enters into a war thinks it's going to be quick >> Mhm.

[00:07:17]>> and it always ends up going forever.

[00:07:19]>> Big business.

[00:07:19]>> Yeah. Military-industrial complex, right? Yeah. So What does that mean for us? Okay, so for us we have a few banks in Canada that are like the few gas station companies the the the few gas companies we have in Canada that are like the few supermarket chains we have in Canada, and a few telecommunication companies we have in Canada.

[00:07:46]And in case you didn't realize it, in Canada, these companies all have the same price for the same thing.

[00:07:54]And uh they all talk to each other. And I think in economic terms that is called an oligopoly.

[00:08:02]Uh congratulations, Canada. And our banks are the strongest banks in the world, so we should be really proud of that.

[00:08:10]Yay, Canada. [laughter] So great for us. Anyways, one thing the banks do do is that um the they they provide us with what they believe is going to happen um with interest rates, with the overnight rate.

[00:08:26]And I thought it would be interesting to highlight what each of the banks is thinking. And you can see for 2026, Scotiabank is thinking we're going to see 75 basis points of increased interest rates.

[00:08:37]>> By the end of the year.

[00:08:39]>> Yeah, for 2026.

[00:08:40]>> Not a chance.

[00:08:41]>> That's crazy. Yeah, yeah, that's outlandish.

[00:08:42]>> First off, I'll tell you that that's not happening.

[00:08:44]>> Yeah.

[00:08:44]>> Uh RBC thinks we're going to hold uh but over 2027, they think we're going to go up one full percentage point.

[00:08:51]>> That's also crazy, I think.

[00:08:52]>> Yeah.

[00:08:53]>> Less crazy, though.

[00:08:55]I think.

[00:08:56]>> Crazy, I mean, we're going to go up by one percentage point. That means I mean, listen, if that happens, it means the housing market catches fire. It means that the plans that the Carney government is putting into place to make us an energy superpower have all taken root >> Right, right, right.

[00:09:11]>> you know, massive stimulating effects to the economy, or that the Strait of Hormuz >> Yeah, where gas is $5 a liter.

[00:09:20]>> All the other straits we didn't know about >> [laughter] >> are all shut.

[00:09:25]It's all shut.

[00:09:26]>> Yeah.

[00:09:26]>> Uh which is also probably That's probably the most likely thing.

[00:09:29]>> Yeah, that is, for sure.

[00:09:30]>> Uh but everyone, as you can see, not everyone, sorry. So, RBC, CIBC, National Bank are all saying 2.75, so 50 basis points added on.

[00:09:41]>> Come on TD and >> and are um I think it was like when they were filling it out, they were just like, "Whatever. Whatever. Just put 2.25."

[00:09:50]>> [laughter] >> But I would be more inclined >> [clears throat] >> to say that with a Prime Minister who was a central banker, you may see the Bank of Canada kind of take a breather. It would make sense, right? Because you've got fiscal stimulus and monetary stimulus, both of which can impact the way an economy works. You now have a central banker who never had an opportunity to really play with the fiscal stimulus end of things.

[00:10:22]And now he's in charge of the whole country.

[00:10:24]>> Mhm.

[00:10:25]>> So he may be calling the central banker, Tiff Macklem, and saying like, "Hey Tiff, listen.

[00:10:30]For the next 2 years, sit on your hands.

[00:10:33]I got this.

[00:10:34]I'm going to stimulate using capital from the government to build infrastructure projects that will help the economy.

[00:10:41]>> Mhm.

[00:10:42]>> I don't want you to do anything with interest rates. Don't cut them. Don't raise them. Let's keep keep sharing.

[00:10:46]That's what I would do. If I was in this situation, I'd be like, "Okay.

[00:10:51]We know that at this point in time interest rates are still fairly low for a government to borrow. And if you can in I mean, listen, it's obviously wasteful when governments borrow to do things, but if you can use the government's balance sheet to borrow money to grow an economy at a time like this, you could end up being quite successful."

[00:11:16]>> Hopefully.

[00:11:17]>> Yeah. Anyways, okay. That That was what I wanted to bring up.

[00:11:19]>> Can I also say that >> No.

[00:11:20]>> Tiff Macklem [clears throat] has to have the coolest name in government right now.

[00:11:24]>> Coolest?

[00:11:25]>> Coolest.

[00:11:25]>> Okay.

[00:11:26]>> Most cool.

[00:11:26]>> Yeah. All right.

[00:11:26]>> Most cool.

[00:11:27]>> Cool.

[00:11:28]Too cool as.

[00:11:29]>> Yeah. Tiff Macklem, you see?

[00:11:31]>> Yeah. Tiff here.

[00:11:32]>> [laughter] >> He's got a little tiff with you.

[00:11:36]>> Uh okay, so there is a a few variables that are going to change things, right?

[00:11:40]Now, we talk about hormones all the time. I figured I would bring up one more uh because Scott Bessent, the Treasury Secretary for the United States, was actually in front of a Senate Finance Committee yesterday, June the 3rd, 2 days ago cuz you're probably going to get this out tomorrow.

[00:12:00]He said that inflation was transitory.

[00:12:03]And every time I hear someone say inflation is transitory, it reminds me of like the Janet Yellen speech in 2021, 5 years ago, when she was like, "Inflation is transitory. Everything's going to be fine." And then in interest rates went up to 9%. So, um or inflation hit 9%. So, I I don't I'm not crazy about anyone from the government trying to talk rates down and saying inflation is transitory. I certainly hope that inflation is transitory.

[00:12:32]But, um the United States has this And like most things in economics and politics, I guess, has this kind of these two divisive opposing sides, right? Right now, one divisive one side is the Trump administration, the Treasury Secretary, the incoming Federal Reserve Chair, who are basically all being programmed to tout lower interest rates are needed, right? There is no inflation. Don't worry about it. Drop interest rates.

[00:13:05]Stimulate borrowers. Let's get this thing going. Let's get this party started. Let's get the, you know, stock market up higher.

[00:13:13]>> Dangerous.

[00:13:13]>> Yeah, cuz Trump wants it. Yeah.

[00:13:15]And on the other side, the opposing side, is reality.

[00:13:19]>> Yeah.

[00:13:20]>> Right? Like, the United States is entering into an inflationary period.

[00:13:24]There are some of the governors on the Federal Reserve Board that are saying like there is no way we're going to cut rates. We have to raise rates. So, those two opposing sides are going to create some friction and it will be very interesting to watch. If the United States drops interest rates, then our Canadian dollar will go up. Right. We may have heightened inflationary problems.

[00:13:49]Um but it would be a you know, better time to go to the States?

[00:13:53]>> Yeah, but I mean like whatever.

[00:13:54]>> Go to any other country that uses US dollars.

[00:13:58]>> and it would allow the Central Bank a little bit of cover to drop interest rates. However, it would put us in lockstep with the United States with having an inflationary problem. Right.

[00:14:07]So, weird situation.

[00:14:09]Um Anyways, I thought you'd find that interesting. And then I think uh the final thing I wanted to say was the fixed rate. So, like we are kind of in the middle of this renewal wave, right? This like 40% of all mortgages are renewing in 2026.

[00:14:33]And we're seeing a lot of customers wondering what product they should take.

[00:14:39]>> Yeah, what what am I to do?

[00:14:40]>> Yeah. Like when I see the variable rates uh when I see the predictions from the banks that like everyone's going to be up 50 basis points, uh it's well, with the exception of TD and it would kind like if you just look at that data without having an opinion like I always have about what's going to happen, >> Yeah.

[00:15:02]>> you would probably be predisposed to take a three-year.

[00:15:05]>> Yes.

[00:15:06]>> Right?

[00:15:06]>> Yeah.

[00:15:07]>> Um >> Even if it did exactly that.

[00:15:10]>> Because we're at four and a half on the prime rate right now. If you're taking a prime minus one three and a half percent variable rate mortgage and you you know, for the most part, you know, Royal Bank is up 1% 2027, Scotiabank's up 75 basis points in 2026.

[00:15:31]Um you know, like >> So, basically CIBC National Bank, TD, is where you want to take a variable rate.

[00:15:39]>> Do you Yeah, I mean, do you even want to take a variable rate if you're CIBC and National Bank? Cuz CIBC and National Bank are saying we're up 50 basis points.

[00:15:46]>> Right. 3 and 1/2.

[00:15:47]>> Four. 3 years, four.

[00:15:49]>> Right.

[00:15:50]>> However, depending on how long it takes for those rates to go up.

[00:15:53]>> Exactly.

[00:15:54]>> Yeah. So, listen, I would still argue for the variable rate product. I I would say I think bond yields like if and I think that the Strait of Hormuz situation, like I keep saying it, I really don't think it drags on much longer, but maybe I'm stupid. Um or like optimistic.

[00:16:12]>> I don't think you're stupid. But optimistic.

[00:16:14]>> There you go.

[00:16:14]>> Yeah.

[00:16:15]Um so, I think it's definitely something uh that people have to consider.

[00:16:21]I will say that like what I am seeing and what I'm hearing from staff here at Connect are like the renewal rates that are being offered to customers on the renewals that are being submitted to them by their banks like three tracks are just like insulting.

[00:16:38]>> The problem too is like they're like like I just spoke to a client yesterday and he's 2 weeks away from his renewal date and they finally sent him his renewal and it's trash. And now he can't do anything. And he was like just kind of waiting and waiting and waiting and I kept saying like we should do something, we should do something.

[00:16:57]>> You can't do anything? You got 2 weeks.

[00:16:58]>> I mean, we can Yeah, do something. But yeah.

[00:17:01]>> Yeah. Just roll your sleeves up.

[00:17:05]All I'm All I mean to say is like you should have a rate locked in no matter what. You should get your bank competing as soon as possible because they're predisposed to not want to. They don't want to compete, right?

[00:17:17]>> Yeah.

[00:17:18]>> And if you like Canadians should not think that they can compete or that they can negotiate with their banks.

[00:17:25]Uh it's just a big trap, right? Like you're If you take a variable rate with a bank, then they're going to identify that you have a low variable rate and try to switch you to a high fixed rate.

[00:17:35]You're never going to get a discounted rate again.

[00:17:37]>> Yeah.

[00:17:37]>> And then on your renewal, you're going to have to go through the same process again. If you take a fixed rate with a bank and you break it, you're going to get hammered with an interest rate differential.

[00:17:46]>> Obliterated.

[00:17:47]>> None of these things happen when you deal with a monoline lender, with a mortgage finance company. None of these things happen. So, it's like putting your mortgage in a safe spot for an extended period of time. Anyway, I don't want to sell mortgages right now.

[00:17:59]>> Mhm.

[00:17:59]>> Um that's our job.

[00:18:01]But, it is interesting to see what's happening with the Bank of Canada.

[00:18:06]We'll be watching on June 10th.

[00:18:08]And uh stay tuned and we'll come back with what we think uh is happening next after we get that June 10th number.

[00:18:18]Bye.