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Interest Rate Roller Coaster Survival Tips

Good evening,


At the fair earlier this summer, at the insistence of our eldest child, I was reintroduced to carnival rides. I now know that even the teacup ride will make me seriously ill, so I had to find some coping mechanisms to get me back on track. As it turns out, there's some similarities to surviving the interest rate and inflation roller coaster we're on as well.


For those wanting a quick synopsis:


- Inflation is coming down (yay!)


- Deflation is yet to be seen 

(prices of goods and services have not come down)


- Interest rates are still high (boo!)


- Due to various factors it is too early to predict how long interest rates will remain high


The latest Canadian inflation (CPI) numbers came out this week for May at 3.4%, a welcome number compared to the slight, worrisome uptick the previous month. 


This CPI report indicates that inflation is on it's way to becoming under control, although we haven't felt any price decreases in our day-to-day lives, since we haven't seen much price deflation yet.



The market is still pricing in another rate increase by the Bank of Canada at their next meeting in July, especially if the job market numbers come in relatively strong again, despite mortgage interest costs increasing by over 29% year-over-year; Of that 3.4% CPI inflation rate, 0.9% was mortgage interest cost (25% of the overall inflation increase!).


While this seems like overkill, the central bank is still hyper-focused on ensuring inflation gets stomped out, by any means necessary. And the bond market is anticipating higher rates for longer:



Current interest rates start around 5% almost across the board as of today, with posted rates well into the 6% and 7% range for retail bank lenders.



So here are some of the tips that may help for your own roller coaster: 


 1) Choose your seat wisely - Make the decision that fits you best, especially if you've been on this ride before. 


 2) Focus your eyes on a fixed point - This will be over eventually, and keeping your eyes on the horizon or the car in front of you may help you get through.


 3) Avoid spicy food - I refuse to follow this advice, I love my Curry Point and I apologize to the passenger beside me. 


 4) Don't get on the ride at all, or sit this one out - some people will have this option, or will consider it at least, and I can respect that. 


We've had hundreds of conversations over the last year and a half, helping people navigate this tricky time, and are always willing to have more. If you or someone you know is thinking they might toss their cookies, please have them reach out and maybe we can help.




Cheers,


Adam Hawryluk


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