Hot & bothered

Oy. Another day. Another nail in the condo coffin. Actually, a blow for real estate in general.

Bond yields jumped and lenders shelved plans for a Spring mortgage rate sale as the cost of living in frosty Canada took a big turn in the wrong direction. Economists at BMO called the event “massive.” Inflation, says CIBC, “accelerated sharply”. And at TD they acknowledged it was “hotter than expected” – because everybody got it wrong.

So the CPI exploded from 1.9% in January all the way to 2.6% last month – the worst number in eight months. Part of the reason was that crazy GST holiday ending, but clothing, food, gas, booze and shelter costs were all higher. “The breadth of inflation, which has been a focus for the Bank of Canada, also worsened with the share of items rising 3%+ increasing modestly,” says BMO. “None of this is encouraging news for policymakers.”

The Street had expected inflation to pop a little when the sales tax came back on, but this 2.6% blockbuster was a surprise. Immediately five-year Canada bond yields swelled, and the next Bank of Canada interest rate cut (April 16th) was thrown into question.

Our CB, everyone agrees, is in a tough spot right now.

This fat inflation stat would be enough to slay the rate doves and bring the hawks back to consider an increase. After all, we’ve had seven chops in a row with the policy rate all but halved in less than a year. Was that too much, too soon?

But wait. Tariff Man may swoop in right after April Fool’s Day with a sweeping 25% levy on all things Canadian, pretty much guaranteeing layoffs, recession and a new prime minister wishing he’d stayed in the cushy private sector (with $6.8 million in stock options).

“The unexpected pickup in core measures clearly isn’t good news for the BoC,” says CIBC, “and this means that the April policy decision hinges entirely on tariff news received in the interim. If the news on reciprocal tariffs on April 2nd is favourable, policymakers will want to pause to assess further CPI readings before moving again, but if a 25% tariff is imposed, that would see policymakers cut given the negative growth ramifications.”

In other words, if Trump whacks us, rates (and mortgages) go down along with the economy. If he cries wolf again, the CB takes a pause.

The news today matters because inflation is rising even without costly tariffs being imposed – levies which will certainly trigger more retaliatory measures and hike the cost of food and everything else most people buy. Then there’s the dollar to vex about. At less than 70 US cents it’s already adding to inflationary pressures. Just check out the Blueberry Index. Scary.

Well, kids, it’s an uncharted path from here on.

Trump says he’s going to tariff us and everybody this time. For sure. Count on it. He’s even admitted a difficult ‘period of transition’ lies ahead for those Americans who thought they were voting for a president would could make life more affordable. Surprise. The opposite.

His money guy, Scott Bessant, says the American economy needs “a detox period” in which fundamental change takes place. Commerce secretary Howard Lutnick adds that a recession is “worth it”. So, government costs, size and services are being slashed. Protectionism and isolationism are meant to put “America First”. And that will mean higher consumer costs, fewer jobs and slower growth for an unknown period of time. The Big Plan for this White House is to (a) see more DOGE blood, (b) cut American corporate (Elon) taxes and (c) tariff the hell out of everybody else, even your BFF.

With $34 trillion in federal debt and a $1.85 trillion annual deficit which taxes can’t cover, the USA obviously needs to right the ship. But exporting its mismanagement to hapless little Canadian beavers, for example, hardly seems fair. After all, we have $900,000 GTA condos and average-priced $2.6 million Vancouver Specials to finance.

Don’t they understand?

About the picture: “Garth: well at least we still have the shirts on our backs,” writes Jim. “This fine fellow was heading out for his daily romp in the snow. It’s hard being a big dog in a small apartment.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/03/18/hot-bothered-2/