Susan Burke

Central bankers took the stage this week, but it was Canadian economic data that stole the show. A significant improvement in inflation for February and a weak reading on retail sales increased expectations for an earlier cut by the Bank of Canada (BoC). Adding to this was the release of the BoCs March deliberations that confirmed the Bank is preparing to cut rates later this year. While the exact timing of the first rate cut is still uncertain, market pricing has rallied around June/July, matching expectations on timing for other major central banks. The inflation reading this week showed a meaningful deceleration, with the headline measure remaining within the BoC 1% to 3% target band. But the big surprise was the heavy discounting on items like clothing, cell phone /internet plans, and food. For the latter, that was the first contraction in three years (seasonally adjusted)! As Deputy Governor Toni Gravelle said at a speech later in the week, this was very encouraging. What was even more promising was the progress on the BoCs preferred inflation metrics. While these have remained stubbornly high over the last few months, they too have started to ease and now sit just above the 3% band. These metrics are starting to follow other measures of inflation lower, including the Banks old preferred inflation measure, CPIX. This index excludes the eight most volatile inflation items such as mortgage interest costs. Importantly, this measure has now reached the BoCs 2% target. Source: TD Economics https://economics.td.com/ca-weekly-bottom-line

Canadian home prices as measured by the seasonally adjusted Aggregate Composite MLS Home Price Index (HPI) were flat on a month-over-month basis in February 2024, ending a streak of five declines that began last fall, according to the latest data from the Canadian Real Estate Association (CREA). The fact that prices were unchanged from January to February was noteworthy given they had dropped 1.3% from December to January. Considering how stable the seasonally adjusted MLS HPI tends to be, shifts this abrupt are exceedingly rare. There have only been three other times in the last 20 years that have shared a sudden improvement or increase in the month-over-month percentage change from one month to the next of this size; all at various points in the last four years when demand was coming off the sidelines. Its looking like February may end up being the last relatively uneventful month of the year as far as the 2024 housing story goes, said Shaun Cathcart, CREAs Senior Economist. With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year. Home sales activity recorded over Canadian MLS Systems dipped 3.1% between January and February 2024, giving back some of the cumulative 12.7% increase in activity recorded in December 2023 and January 2024. That said, the general trend has been somewhat higher levels of activity over the last three months compared to a quiet fall market in 2023. Source: https://stats.crea.ca/en-CA/

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A credit card is only a benefit if you have a good relationship with your spending. Otherwise, your shiny new financial tool can quickly turn into a burden. How do you make sure that doesnt happen? Try these three key money habits. 1. Pay off your purchases When you use your credit card to make purchases, youre then responsible for paying it off. Each month, youll receive a statement outlining how much youve spent on your card and how much you need to pay off. Paying off the entire balance each month will help you avoid costly interest charges, but if you cant afford that, at least make the minimum payment to prevent a ding on your credit score. 2. Manage your credit utilization ratio Your credit cards limit is the maximum amount of debt you can carry at one time. Your limit will usually be between $1,000 and $10,000. You shouldnt spend right up to your credit cards limit, though. Getting too close to the limit will negatively affect your credit score due a calculation called your credit utilization ratio. Your credit utilization ratio is a measure of your credit card balance against your total credit limit. To maximize your credit score, keep your credit utilization ratio below 35%. For example, if you have a credit card with a $10,000 limit, try not to carry a balance higher than $3,500. 3. Choose the right credit limit Choose a credit limit that accurately reflects your spending habits. If you only plan to use your credit card for occasional purchases and online shopping, a few thousand dollars should be enough. If you spend thousands of dollars per month on it, pick a higher credit limit to keep your credit utilization ratio in check. Be realistic about how youll pay it back, as well. If you know that you occasionally carry a credit card balance and incur interest charges, choose a smaller credit limit to minimize the monthly interest youll pay.