The good news is Canada’s inflation rate keeps slowing in response to the highest interest rates in more than 20 years. The bad news is the affordability crisis keeps deepening as the cost of living keeps going up amid continuing recession threats. Fuelled by lower gasoline prices, October’s consumer price index rose by 3.1% compared to 3.8% the month before. .That’s because pump prices fell about 6.4% in the past month alone and are down about 7.8% from this time a year ago. Stripping out those numbers, inflation would have clocked in around 3.6% or about a tenth of a point from 3.7% September.Food prices continued to outpace the broader expansion, at 5.4%, but are still down from an annualized 5.8% the month before. By comparison, inflation at fast food and takeout restaurants was about 6.4% compared to 5.2% for sit down establishments.Although those numbers are all still well out of the bank’s 2% target rate, it means that interest rates have likely peaked ahead of its December 6 meeting. If current trends hold, analysts say mortgage and credit card holders could start seeing some real relief as early as next spring.That was bolstered on Tuesday after Scotiabank, BMO and TD all lowered fixed mortgage rates by 15 to 20 basis points, the first real adjustments in weeks.“Banks finally had to budge a bit with yields coming down so much,” said Ryan Sims, a TMG mortgage group broker and former investment banker..“We continue to expect the Bank of Canada is done with rate hikes and for them to cautiously pivot to cuts over the latter half of 2024,”RBC economist Claire Fan.That further bolsters the case for lower overall interest rates starting in the second half of next year, although Governor Tiff Macklem has held out the possibility of another hike if trends change.“We continue to expect the Bank of Canada is done with rate hikes, and for them to cautiously pivot to cuts over the latter half of 2024,” wrote Claire Fan, an economist with the Royal Bank of Canada.And although the worst is over, recession fears persist.“Ongoing signs of deterioration in consumer spending and labour market conditions support our outlook for inflation to keep moderating in the quarters ahead,” she added..Housing affordability is sure to be top of mind when Finance Minister Chrystia Freeland releases her fall economic update in Ottawa on Tuesday, which reportedly contains big spending measures to kickstart the housing sector.That’s because shelter continues to be a nagging sticking point, with rents up 8.2% and property taxes at least 4.9% — Calgary homeowners are facing at least a 7% hike next year.In the meantime, those with mortgage renewals are still facing some pretty hefty increases until then. And credit cards are likely to be maxed heading into the Christmas shopping season.According to Ron Butler, of Butler Mortgage: “Traditionally, in all cases mortgage rates rise faster than they fall,” he told CanadianMortgageTrends.com. “Canadian banking is a herd mentality, and no one wants to be too offside the competition for too long.”
