The Consumer Price Index (CPI) rose 2.7% year-over-year (y/y) in April, down from 2.9% in March. This marks the fourth consecutive decline in core inflation. Food prices, services, and durable goods led to the broad-based deceleration in the headline CPI.

The deceleration in the CPI was moderated by gasoline prices, which rose faster in April (+6.1%) than in March (+4.5%). Excluding gasoline, the all-items CPI slowed to a 2.5% year-over-year increase, down from a 2.8% gain in March.

The CPI rose 0.5% m/m in April, mainly due to gasoline prices. On a seasonally adjusted monthly basis, it rose 0.2%.

While prices for food purchased from stores continue to increase, the index grew slower year over year in April (+1.4%) compared with March (+1.9%). Price growth for food purchased from restaurants also eased yearly, rising 4.3% in April 2024, following a 5.1% increase in March.

According to Bloomberg calculations, the three-month moving average of the rate rose to an annualized pace of 1.64% from 1.35% in March. That’s the first gain since December.

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed to 2.9% y/y in April, and the median declined to 2.6% from year-ago levels, as shown in the chart below. Rising rent and mortgage interest costs account for a disproportionate share of price growth, with shelter costs up 6.4% year-over-year. Growth in mortgage interest costs slightly decreased in April but remained 24.5% higher than a year ago.

The breadth of inflationary pressures narrowed again in April, with the proportion of the CPI basket experiencing growth exceeding 3%, decreasing to 34% from 38% in March.

Bottom Line

April’s inflation readings largely met expectations but with underlying details (including further slowing in the BoC’s preferred ‘core’ measures) pointing to a further reduction in inflationary pressures. The Bank of Canada is as concerned about where inflation will go in the future as where it is right now. Still, Canada’s persistently softer economic backdrop (declining per-capita GDP and rising unemployment rate) increases the odds that price growth will continue to slow. The case for interest rate cuts from the Bank of Canada continues to build. The central bank has every reason to cut rates at their next meeting on June 5. Still, given the BoC’s extreme caution, we must consider the possibility that they will wait until the July meeting to take action, and only if inflation continues to recede.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Image Credit: Rose Butler, Unsplash

Though it’s a great idea to review your mortgage each year, there is never a better time for a mortgage review than in the year leading up to your renewal.

Take advantage of this point in your mortgage; your wallet will thank you.  Here’s why:

Get a Better Rate: Explore other lenders for preferable interest rates without breaking your mortgage at renewal time. With interest rates expected to start coming down soon, reaching out to explore the market could potentially save you considerably over the next term.

Consolidate Debt: Renewal time is also an excellent opportunity to assess your existing debt and decide whether consolidating it into your mortgage is beneficial. Whether it’s holiday credit card debt, car loans, education loans, or other debts, consolidating your mortgage streamlines your payments into one, potentially at a lower interest rate than through other sources.

Renovations: Renewal time can also provide a great opportunity to tap into home equity for renovations, such as modernizing your kitchen, making bathroom upgrades, or updating your landscaping.

Investing In Other Properties: Home equity can also fund the down payment or outright purchase of a vacation home or investment property.  Or you could use it to help your kids purchase their first home. Whether you’re considering doing this now or in the future, you could always use this time to add a home equity line of credit to your mortgage at renewal.  Whether you use the funds now or in the future, it’s great to plan ahead so you can act on opportunities when they arise.

Planning for Retirement: Adding a line of credit before you retire can help set you up to access the equity in your home after you no longer qualify due to reducing your income from work.  Doing this at renewal will allow you to switch to the lender with the best terms for you without incurring a penalty.

Adjust Your Mortgage To Your Current Needs and a Changing Rate Environment: Switching between fixed and variable rates, shorter or longer terms, or adjusting your amortization to pay less interest, or to lower your payment may also be possible at renewal.

Aligning your mortgage with your future plans, while keeping current circumstances in mind, helps keep you sustainably on track to reach your financial goals.  Feel free to reach out at any time for a complimentary mortgage review.  I’m always happy to help!

Adapted from DLC Marketing

Image Credit: Tyler Nix