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April 16, 2025 - Interest Rate, Inflation & the Price of Bread

Olu Olu
Apr 16
3 min read

As the tariff war between Canada and USA rages on, the Bank of Canada (BoC) decided to hold its policy interest rate steady at 2.75% on April 16, 2025 and the next announcement is scheduled for June 4, 2025. This decision is quite expected as everyone waits to see the full economic impact of the ongoing tariff/trade wars. Such of these effects may include inflation, loss of jobs, reduced consumer spending and declining company revenues.

The previous rate cuts were largely driven by declining inflation levels and the need to rescue the economy from a per capita recession. A per capita recession occurs when the economy is nearing a recession, but factors like an increasing population keep the GDP from declining. However, considering the recent tightening of immigration policies, the government needs to rely on other measures, like rate cuts, to stimulate economic growth.

HOW DOES THIS AFFECT CANADIANS?

Like some Nigerians will say, how does this affect the price of bread? Well, for bread specifically, it's still about as expensive as it's been since 2022. However, we have some good news in other areas as described below.

Lower Borrowing Costs and Increased Consumer Spending: With reduced interest rates, Canadians will likely see lower costs for borrowing, including mortgages, personal loans, and credit lines. Cheaper borrowing costs can boost consumer spending, as people are more likely to take out loans for major purchases or use credit for everyday expenses.

Reduced Savings Returns and Investment Shifts: On the flip side, the returns on savings accounts and fixed-income investments like GICs will decrease, meaning less interest income for savers. This may encourage Canadians to diversify their investments into higher-yield options such as stocks, real estate, or ETFs to potentially offset lower returns from traditional savings.

Housing Market and Business Investment: Lower interest rates can stimulate the housing market by making mortgages more affordable, potentially leading to increased home buying activity and higher home prices. Additionally, lower rates can encourage businesses to invest in expansion and new projects, potentially leading to job creation and economic growth.

WHAT CAN YOU DO?

✅ Stay Disciplined: Create a budget, stick to it and avoid impulse purchases. Focus on buying only what is necessary and within your financial means. That way, you can have surplus funds left for investments and opportunities that are coming up 2025.

✅ For Conservative Investors: Lock in current rates by purchasing fixed-term GICs before rates drop further. This can help secure a stable return on your investments in case you need the funds soon and would like to protect it from market volatility.

✅ Diversify Your Portfolio: As interest rates decline, consider shifting some funds into high-yield investments like stocks, real estate, or exchange-traded funds (ETFs). These can offer better returns and is more advisable for long term investors only.

✅ Hedge Your Investments: Implement a dollar-cost averaging (DCA) strategy. By investing a fixed amount regularly per asset group, you can reduce the impact of market volatility and avoid emotional trading, leading to more consistent positive outcomes.

✅ Review Your Debt: Lower interest rates can be a good time to refinance existing loans or mortgages to take advantage of lower payments. You can also seek financial advice to decide which debts to pay first.

✅ Build Emergency Funds: Ensure you have an adequate emergency fund in a high-interest savings account or Tax-Free Savings Account (TFSA) to cover unexpected expenses without needing to liquidate (long term) investments.

✅ Stay Informed: Keep an eye on economic trends and adjust your strategy as needed. Consulting with a financial advisor can provide personalized insights and help you navigate changing market conditions.

Contact us today for a tailored strategy to fit your personal financial realities and to make sure you are always ready for whatever the future brings!Related blogs: