January’s inflation numbers are in, and they’re not exactly what the Bank of Canada (BoC) was hoping for. Headline inflation ticked up by 0.1% to 1.9%, according to Statistics Canada. While that might not seem like much, inflation would have been even higher if not for the federal GST holiday. 

The biggest driver? 

Energy prices, which surged 5.3% year-over-year, with gasoline alone jumping 8.6%.

With rate cuts widely expected in 2024, many were hoping for a March cut. But the BoC has been clear—it needs to see inflation firmly under control before making any moves. January’s inflation increase throws a wrench into those expectations, and now, some economists are predicting the BoC might hold steady on March 12, its next scheduled rate announcement.

 

What Leading Economists Are Saying

Some of Canada’s top economists have weighed in following the latest inflation data. Here’s what they had to say:

Douglas Porter – Chief Economist, BMO

“We continue to lean to the view that the BoC will take a pause at their next decision (March 12), although developments on the tariff front may yet have a big say in that call—the possible 25% U.S. tariff on Canada and Mexico still looms for March 4.”

Derek Holt – VP & Head of Capital Markets Economics, Scotiabank

“There is too much underlying inflationary pressure in Canada to warrant an inflation-targeting central bank easing monetary policy further.”

James Orlando, CFA – Director & Senior Economist, TD Economics

“The BoC is in a difficult place. Does it weigh the downside risks to the economy in the face of U.S. tariffs, or does it focus on recent economic strength and the impact this is having on inflation?”

He added:
“There is plenty of time between now and March 12, and if the President’s first few weeks are anything to go by, a lot could change before then.”

Randall Bartlett – Deputy Chief Economist, Desjardins Economics

“Inflation is coming in around the BoC’s target, and we’re tracking Q4 real GDP growth that is at or slightly above the BoC’s latest forecast. As such, we believe the Bank will likely take a pause on rate cuts in March. But ongoing tariff threats from President Donald Trump mean downside risks to the economy remain, making the timing and pace of future rate cuts highly uncertain.”

Abbey Xu – Economist, and Claire Fan – Senior Economist, RBC

“We think the BoC will want to wait for more data on how underlying price pressures are evolving—excluding the impact of the tax holiday—and take a pause from cutting interest rates in March.”

 

What This Means for Mortgage Borrowers

If you were hoping for a rate cut next month, this latest inflation data suggests you might have to wait a little longer. The BoC remains cautious, and the chances of a March cut are now lower than before.

However, the wildcard in all of this is the potential 25% tariffs on Canada and Mexico that Trump has threatened. If the tariffs become reality, the economic impact could force the BoC to reconsider its approach. 

 

Fixed Mortgage Rates 

While the rise in inflation wasn’t exactly unexpected, bond yields spiked up following the report. of the key contributing factors to fixed mortgage rate pricing. As bond yields rise, upward pressure is placed on fixed mortgage rates. While most mortgage lenders have left their fixed rates unchanged, further upward movement in yields would result in increases to fixed mortgage rates. 

 

Switching Your Higher Rate Mortgage to a Lower Rate 

If you have a purchase closing or mortgage renewing within the next 120 days, then the only way to protect yourself against potentially rising rates is to get something locked in ASAP. If rates drop, we can always get your rate lowered for you. It doesn’t matter if you have already signed or not. We can even switch you to a different lender if need be. We’re committed to getting you the lowest mortgage rate on the market and are continually combing the market to bring even lower rates to our clients. 

If you’re currently locked into a higher rate mortgage, then reach out to us about potentially switching you to a lower rate in the middle of your term.  Check out my blog on Switching Your Mortgage to a Lower Rate for more detail on how this works. 

 

Final Thoughts

At the end of the day, predictions are just educated guesses. While many expected rates to come down in March, this latest inflation report is changing the conversation. The BoC is in wait-and-see mode, balancing inflation concerns, economic growth, and global uncertainties like U.S. trade policies.

For mortgage borrowers, this highlights the importance of having a flexible strategy. Whether you’re considering locking in with a fixed rate or going variable, making informed decisions is key. If you’re unsure how these shifting rate expectations affect you, let’s chat—we can help you navigate the uncertainty and make the best choice for your financial goals.

Read the full Statistics Canada report here.

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