Canada’s Prime Minister Mark Carney is making local infrastructure a central pillar of his economic agenda. This week’s announcements ($51 billion infrastructure spending plan over the next decade) signal a federal government eager to deploy billions into communities. But with it comes the age-old question: is this a long-term productivity strategy, or a familiar cycle of politically attractive spending?

Why infrastructure, why now?

There are three economic forces driving this push:

1. Slowing growth and the need for stimulus. Canada’s economy has shown signs of cooling. High interest rates have dampened housing activity, while consumer spending is becoming more cautious. Infrastructure spending is one of the few tools governments can deploy quickly to inject demand into the economy. In that sense, this looks like classic fiscal stimulus.

2. Productivity concerns. Canada has a well-documented productivity problem. Output per worker has lagged behind peers like the US for years. Infrastructure - particularly transit, trade corridors, and digital connectivity - is often cited as a key constraint. If targeted well, these investments could improve long-term economic capacity.

3. Political timing. Infrastructure spending is visible. Roads get build, facilities open, jobs are created locally.

The economic case: potential upside

Done right, infrastructure investment can deliver meaningful returns.

Short term: job creation and local growth. Construction projects generate immediate employment. Local suppliers benefit. Municipal economies get a boost.

Medium-term: investment attraction. Better infrastructure lowers costs for businesses. Improved transit expands labour markets. Upgraded logistics networks reduce bottlenecks. These factors can attract private investment - something Canada has struggled with in recent years.

Long-term: productivity gains. This is the real prize. If infrastructure reduces commute times, improves trade efficiency, or enhances connectivity, it can raise the economy’s long-term growth potential.

But - and this is critical - not all infrastructure spending achieves this.

The risk: spending without returns

Canada has been here before. Large infrastructure programs often suffer from cost overruns, project delays, politically driven allocation, and a low economic return on investment. The key issue is how effectively the money is deployed.

• The allocation problem: federal infrastructure dollars are distributed through agreements with provinces and municipalities. While this respects jurisdictional realities, it also dilutes strategic focus. Projects that are politically popular locally may not be economically optimal nationally.

• The timing problem: infrastructure spending is notoriously slow to roll out. By the time projects begin, economic conditions may have shifted.

• The accountability problem: governments announce funding totals, but rarely provide clear metrics on economic return per dollar spent. Without this, it’s hard to distinguish investment from spending.

Who bears the risk?

The same guys who always do… the taxpayers.

Carney’s infrastructure push sits at the intersection of good economics and political reality. One the one hand, Canada genuinely needs better infrastructure to address productivity challenges and support growth. On the other, we have a long track record of spending heavily without consistently delivering strong returns.

The difference this time will come down to execution.

One of my favourite shows on Netflix was The Good Place. My favourite scene was when the group found out that no one had gotten into heaven in 521 years because it was impossible to earn enough good points when all behaviour had all sorts of unintended negative consequences.

A recent investigation by advocacy group Stand.earth found that Canadian investors have directed billions of dollars into companies tied to the US Immigration and Customs Enforcement (ICE). And most investors don’t realize its happening.

Most Canadians don’t invest in ICE contractors explicitly. Instead, the exposure happens through three channels:

1. Public equities

Canadian mutual funds hold shares in large US firms like:

• Palantir (data analytics for surveillance and tracking)

• General Dynamics / L3Harris (defence contractors)

• CACI (IT + intelligence services)

• AT&T (telecom infrastructure)

These companies have multi-line businesses, but ICE contracts are embedded within them. So owning any sort of broad market exposure to US equities almost guarantees some ICE exposure.

2. Credit markets

Let’s say you only hold individual stocks that you screen religiously. You still have money in the bank right? Canadian banks have provided

• ~23 billion USD in loans and bond finance to ICE-linked companies since 2020, and

• ~9.8 billion USD in equity investments as well.

3. Pension fund allocations

Ok, so you hold no index funds and keep all your money as cash under the mattress. Do you still earn any sort of employment income? If so, you’re contributing to ICE. Public pensions, including the Canada Pension Plan and major provincial funds - have invested over 2.5 billion USD in these companies. Given CPP contributions are mandatory for employees, even if you personally avoid these companies, your retirement savings won’t.

ICE outsourcing relies heavily on private-sector vendors:

• Surveillance tech (Palantir)

• Detention infrastructure (CoreCivic, GEO Group)

• Security and logistics providers

From an investor lens, holding a company that has contracts with the government is highly desirable, because it will have predictable cash flows. And because ICE is usually a small revenue segment for these large firms, avoiding ICE-linked firms would require more legwork than most funds want to do. If you want to look at it in a darker way, the funds also have a sense of plausible deniability: “you can’t expect us to track complex supply chains to actively exclude ICE. We’re not purposely investing in ICE - we’re investing in a diversified company.”

So the question is: if you don’t purposely mean to invest in ICE, if you’re just trying to live your life and be financially responsible, but you end up investing billions of dollars in an organization you do not stand for, do you have an ethical obligation to do anything?

The cordial angels in The Good Place who were adamant about following rules despite it resulting in an objectively unfair result may say no. Are we any better?

I went in for my annual physical yesterday. As is customary, I had my blood pressure tested. (Everything was a-OK). Outside of getting my blood drawn, using the blood pressure cuff is one of my least favourite parts of the exam. Even though I know it’s only temporary, the feeling of the cuff tightening around me until I can feel my own heartbeat always freaks me out.

There’s a particular kind of frustration in today’s economy that’s hard to describe. It’s not panic or collapse. Everything just feels… tight. Mortgage payments. Grocery bills. Job security. Even optimism. We feel like we are being squeezed from multiple directions at once. And due to the reasons below, unlike my blood pressure cuff, this squeeze doesn’t seem like it will ease anytime soon.

Reason 1: The Bank of Canada is out of easy moves

At the center of everything is the Bank of Canada. For most of the past two decades, monetary policy followed a similar playbook: Inflation too high? Raise rates. Growth too weak? Cut rates.

But today, that playbook is breaking down. We’re currently in a situation where inflation risks are still lingering (note: energy and global instability), economic growth is clearly slowing, and household debt levels remain among the highest in the developed world. This creates a policy trap: if the BoC cuts rates too early, it risks reigniting inflation. But if it raises rates, it risks pushing more households into financial distress. There’s no clean move.

Reason 2: Housing has frozen

For years, the dominant narratives around Canadian housing were 1) a crash or 2) a rebound. But we’re seeing neither. Instead, we’re entering a prolonged stalemate. In markets like Toronto and Vancouver, prices have declined from peak levels, inventory has risen to multi-year highs, and transaction volumes remain weak. But affordability hasn’t meaningfully improved. Why? Because even though prices are down slightly, borrowing costs are dramatically higher than they were just a few years ago. So buyers can’t buy, sellers don’t want to sell, and the market freezes.

Reason 3: The cracks are spreading up the credit ladder

Remember that scene from The Big Short where Joseph Gordon-Leavitt breaks down that Jenga tower with breathtaking finesse? We’re starting to see it again. Recent data shows a sharp rise in mortgage delinquencies among prime borrowers (those with strong credit histories and stable incomes). The problem can be traced back to mortgage rate renewals. Many homeowners who locked in ultra-low rates in 2020-2021 are now renewing at much higher rates. And remember, these aren’t those people you would typically classify as fiscally irresponsible. They were simply regular citizens who got into the market at prices they were able to afford at the time. They were not reckless; the market just changed faster than expected.

As long as the current status quo continues, rates will remain high. Until we see a sharp rise in unemployment or delinquencies, it simply does not make sense to make a move. And so we stay. Holding our breath. Because everything is a little tight right now.

My partner and I purchased a house towards the beginning of the year, and we chose a variable interest rate mortgage to finance it. Ever since, I’ve been particularly interested in every interest rate announcement the Bank of Canada has. And even though the last meeting held the rate flat, markets are now pricing in the probability of a near-term cut.

There’s a particular kind of optimism that shows up right before monetary policy turns. The narrative forming is a familiar one: a “soft landing”, followed by gradual rate cuts that relieve pressure without breaking anything. It’s a comforting story, but life usually never works out the same way as fairy tales do.

Rate cuts are not a leading indicator, but always a response function - to bad times. Consumer spending is usually slowing faster than expected, businesses are pulling back on investments, and there’s a general sense of economic slowdown. And that is not to diss the Bank of Canada. An entire country’s economy is a very large ship, and when said ship is off-course, it’s not an easy thing to turn it around.

Canadian households are among the most indebted in the developed world. When you give someone with a bunch of debt some extra breathing room, they don’t immediately consume more goods and services to boost the economy; their first priority is to repay their debt and rebuild their savings. Lower rates may not do much to turn the economy around at all.

To make matters worse, Canadians’ debt has a heavy concentration in housing. This reflects in consumer spending on mortgage payments and monthly rent. Housing costs are much stickier than grocery store prices; if you lock in a 5-year fixed interest rat, your costs are locked in for the immediate future; the Bank of Canada cutting rates now will not help you. In fact, even with the cuts, many households are still going to be renewing into rates higher than their original mortgages.

After years of volatility, the housing market is not quick to react to interest rate shifts, but rather consumer confidence. In a world where wage growth hasn’t caught up to prior price increases, and investors are hesitant to act due to higher regulation and fees, and government policy around housing supply, immigration and taxes are highly uncertain, those who can hold on for a bit longer likely will. But those who do not have the financial strength? Those cuts may be too little, too late.

Let’s hope the cuts come early enough to stabilize housing. My mortgage, especially, will give its thanks.

There’s been a lot of focus lately on GDP figures, household budgets, grocery prices, and interest rate chatter. But something far more important just broke.

On March 4, 2026, the Bank of Canada warns of risks linked to non‑bank players in debt markets: Governor Tiff Macklem sounded the alarm about growing vulnerabilities in Canada’s financial system tied to non‑bank lenders, hedge funds, and private credit markets - institutions that don’t have the same transparency or regulatory oversight as traditional banks.

At first glance, it might sound like esoteric central‑bank speak. But the implications touch every Canadian - from the savings in your TFSA and RRSP, to mortgage payments, to employment prospects.

Let’s unpack not just what Macklem said.

The backdrop: A financial system under strain

We’re living through an economic stretch where multiple stresses overlap:

• Canada’s services sector activity is shrinking for a fourth consecutive month, according to the latest Purchasing Managers’ Index (”PMI”) data.

• The federal government posted a C$26.14 billion budget deficit in the first nine months of 2025/26.

• Global trade tensions and geopolitical uncertainty are adding volatility to markets.

In this environment, the Bank of Canada didn’t mince words: “economic uncertainty must not become financial market instability.” That’s a big deal. For a central bank that has spent years focused on inflation, labour markets, and interest rates, suddenly zeroing in on systemic vulnerabilities in private finance is a shift worth paying attention to.

What are these “non-bank players - and why should you care?

So who are these “non‑bank players”?

• Hedge funds buying up government bonds have ballooned in influence.

• Private credit firms are lending more and more - often with less reporting or oversight.

• Institutional investors (like pension funds) are filling financing gaps that used to be handled by banks.

Traditionally, banks were the central pillars of our financial system. They’re heavily regulated, report regularly, and are stress‑tested by government authorities to ensure stability under downturn scenarios. But the Financial Crisis of 2008 exposed how system risk can still emerge, even with tight bank regulation. What Macklem is arguing is that a rising share of Canadian debt markets is now influenced by players that regulators don’t fully see or control.

That matters because:

• These institutions may not be prepared for market stress.

• They may withdraw capital suddenly if conditions change.

• Their actions can amplify shocks, not absorb them.

In other words, Canada’s financial system might be more fragile than most mainstream commentary admits. And that fragility could show up in very concrete ways - from mortgage funding to credit availability to investment returns.

Is Canada alone in this? Not really.

Canada’s financial markets are interwoven with global capital pools. The same tensions Dick Fuld and Lehman Brothers helped expose in 2008 still linger today, just in a different form:

• Shadow banking systems,

• Private credit giants, and

• Alternative lenders unregulated like banks.

Other major economies have flagged similar concerns. The difference here is that Canada has historically escaped the worst of global financial upheavals - partly due to strict banking regulation. But as non‑bank credit grows, that protective buffer erodes.

Why this should concern everyday Canadians

1) Your investments are connected to this risk.

Non‑bank players have been buying up so much sovereign bonds - including Government of Canada debt - that they now account for a significant share of demand. If those investors suddenly turn cautious or unwind positions quickly, it could:

• push yields higher,

• raise borrowing costs,

• disrupt markets unexpectedly.

You might feel this as higher borrowing costs, more volatility in your portfolio, or a sudden repricing in assets people think are stable.

2) It could make the Bank of Canada’s job harder

We are already in a fragile economic moment:

• Growth is slowing.

• Service sector activity is contracting.

• Global uncertainty from geopolitical conflict is rising.

Amid this backdrop, central banks usually steer policy by adjusting rates and communicating their outlook. But if the financial system itself has cracks, then rate policy becomes less reliable as a tool.

Instead of adjusting rates to cool inflation or stimulate growth, the Bank of Canada might find itself reacting to instability in credit markets first - a far more unpredictable position.

3) Mortgage stress just got more real

Canada has one of the most heavily debt‑loaded housing markets in the world. While this article isn’t about mortgage shock per se, it’s impossible to divorce household debt dynamics from system risk.

If non‑bank credit markets seize up or retrench quickly, credit availability might tighten, making it:

• harder to refinance mortgages,

• harder for first‑time buyers to get approved,

• more expensive to borrow.

Can ordinary Canadians do anything right now?

Yes - it all starts with awareness. Don’t tune out just because this feels like “market stuff.” Systemic risk can spill over into job markets, housing costs, borrowing conditions - all things that affect household finances.

Here’s what you can do:

• Take volatility seriously — build cushions in your financial plan. Don’t assume fixed‑income markets are “safe” just because they are sovereign bonds. Bond markets are influenced by private liquidity dynamics too. Expect volatility - not just in stocks but in interest‑rate‑sensitive assets. Diversification matters even more when market structure is shifting underneath.

• Prioritize savings and emergency funds.

• Be cautious about high‑debt expansion right now. Fixed mortgage rates might hide system risk for now, but financial stress in markets can translate into credit tightening, which is bad news if you plan to borrow soon. Watch for tighter qualifying standards and fewer “risk on” products.

• Diversify your investments cautiously.

• Ask your financial advisor about exposure to private credit and bond markets.

Final thought: we can’t ignore structural risk anymore

For years, Canadians have been rewarded for believing in system stability - low inflation after the pandemic, stable banks, and generally predictable monetary policy. But today’s warning from the Bank of Canada is different. It’s not about inflation targets or employment. It’s about the structure of finance itself - and who holds the strings.

If stability is the product we’ve all been buying - what happens if liquidity is the first thing to disappear?

If we don’t pay attention now, we could find ourselves reacting only after the risk becomes reality. And when it comes to your money - your mortgages, savings, investments, and peace of mind - after is too late.

Until next time,

Canadian Money Matters

According to recent data from Statistics Canada, real gross domestic product (GDP) shrank by 0.6 % annualized in the fourth quarter of 2025, coming in worse than analyst expectations and marking a noticeable slowdown in economic activity. Businesses reduced production and instead drew down inventories, a key factor behind the contraction.

While GDP for the full year still showed modest overall growth, this recent slowdown highlights underlying pressures in the economy, not just seasonal or inventory quirks.

Structural headwinds

Two broad trends help explain this dip:

1. Trade and export weakness: Exports - especially to the US - have struggled as Canadian firms face uncertain trade conditions. The volatility in export activity has dragged on growth through 2025, contributing to the uneven quarterly swings in GDP. Canada’s heavy reliance on the US as an export destination - accounting for around three-quarters of shipments — means that any external tariff or trade policy shift can significantly impact economic output.

2. Inventory adjustments: A notable part of the contraction came from businesses selling off previously produced goods rather than creating new ones. This doesn’t necessarily signal a collapse in demand, but it does show that production has slowed, which can ripple through employment and investment decisions.

Even before the GDP data, some analysts suggested Canada might face recessionary risks as consumer confidence softened, spending slowed, and investment decisions were put on hold amid uncertainty. While those predictions varied in timing and severity, the Q4 contraction aligns with a narrative of slowing momentum.

Policy responses

In attempts to support economic growth, the Bank of Canada has signaled a willingness to adjust interest rates. Last year saw cuts to stimulate activity as economic growth forecasts were lowered - though policymakers face a delicate balance between supporting growth and managing inflation.

On the fiscal side, the federal budget revealed a widening deficit — including a C$26 billion shortfall over the first nine months of the 2025/26 fiscal year — as spending continues to outpace revenue growth.

What this means for Canadians

A slowing economy affects everyday financial life in multiple ways:

• Job market and wages: Slower growth can cool hiring and wage gains, especially in sectors tied to trade and manufacturing.

• Household budgets: Continued inflation in essentials like groceries and housing can squeeze disposable income.

• Investment portfolios: Equity markets often react to slower growth expectations, potentially increasing volatility, particularly in resource, financial, and cyclical sectors.

• Interest rates and debt: Lower rates can help borrowers but might put pressure on savers who rely on interest income.

It’s too early to call a full recession - Canada’s economy still posted overall growth in 2025 - but the contraction highlights structural vulnerabilities. Trade diversification, productivity improvements, and policy support will be key determinants of whether the economy rebounds or stalls.

For individuals, this environment underscores the importance of emergency savings, diversified investment strategies, and staying informed about macroeconomic trends that could affect jobs, borrowing costs, and long-term financial goals.

If Canada were to enter a mild recession in 2026, what would you change first: your spending, your investment allocation, your savings rate - or nothing at all? Reply and let me know.

Until next time,

- Canadian Money Matters

Canada’s largest banks reported stronger-than-expected profits for the first quarter of 2026, even in the face of trade uncertainty, stubborn inflation, and slow GDP growth.

• RBC: $4.08 actual EPS vs $3.85 analyst forecast EPS

• TD: $2.44 actual EPS vs $2.26 analyst forecast EPS

• CIBC: $2.76 actual EPS vs $2.39 analyst forecast EPS

• BMO: $3.48 actual EPS vs $3.20 analyst forecast EPS

• Scotiabank: $2.05 actual EPS vs $1.95 analyst forecast EPS

• National Bank of Canada: $3.25 actual EPS vs $2.98 analyst forecast EPS

What’s fueling bank resilience?

The Canadian banking sector isn’t just passively riding economic conditions - it is actively adapting through

1. Fee-based and diversified revenue streams: Traditional lending (like mortgages) isn’t the only game in town anymore. Wealth management fees, capital markets activity, and advisory services are generating strong revenue even when loan growth slows.

2. Strong capital positions: Canadian banks entered 2026 with healthy capital buffers, meaning they hold more capital than regulators require to absorb potential losses. In practical terms, this gives banks room to

   1. Absorb loan losses if parts of the economy weaken

   2. Continue lending without immediately pulling back

   3. Maintain investor confidence during periods of uncertainty

3. Strategic positioning amid tariff uncertainty: Ongoing trade negotiation risk - particularly with the US - could slow parts of the economy. But banks with diversified North American operations are better insulated because their earnings aren’t tied solely to Canadian economic activity. If business lending slows in one region or sector, revenue from other markets or business lines can help offset the impact.

Why this matters to Canadians

At first glance, strong bank earnings might seem removed from the daily financial lives of Canadians, but these results matter in a few practical ways:

• It is a signal of economic stability: Despite slower GDP growth and tariff-induced uncertainty, the banking sector’s performance suggests that Canada’s core financial system is not collapsing, and may, in fact, be underpinning parts of economic resilience. Stable banks often mean more confidence across capital markets and lending sectors.

• It provides ease of credit access for consumers: If banks are confident and profitable, they are usually more willing to lend, whether that’s in the form of mortgages, personal loans, or business credit. This could positively impact Canadians looking to borrow for homes or businesses.

What does this mean for housing?

It’s a mixed signal. Bank earnings strength doesn’t change the reality that Canadian households still face elevated debt and mortgage burdens. Mortgage debt levels are nearing $2 trillion, and many renewals in 2026 could push payments higher — especially for those who locked in low rates during the pandemic.

What does this mean for investors?

For investors, this earnings season reinforces a structural theme: diversification within Canadian banks matters. Those with strong wealth management and capital markets operations seem better positioned to weather slow economic growth and tariff noise.

However, risks remain:

• Continued trade tensions could dampen business lending and cross-border investment.

• A slowing housing market and high household debt levels could weigh on credit growth.

• If inflation doesn’t ease as expected, monetary policy could keep lending costs elevated.

Conclusion

Canada’s major banks posting strong profits is good news for the stability of the financial sector — but it doesn’t necessarily mean the economic challenges Canadians face are gone. Rather, it highlights how Canadian banks have adapted their business models and diversified revenue beyond traditional lending.

Do strong bank profits make you feel more confident about Canada’s economic outlook? Or do they highlight a growing disconnect between financial institutions and household finances?

Until next time,

- Canadian Money Matters

Canada’s government is actively seeking to expand trade relationships in the Indo‑Pacific region — notably with:

• India: a fast‑growing major economy and rising global consumer market; Canada is negotiating a Comprehensive Economic Partnership Agreement to grow two‑way trade significantly;

• Australia: strong bilateral connections in resources and investment; Ottawa recently strengthened cooperation on tech and supply chains; and

• Japan: the world’s fourth‑largest economy and a major partner in clean energy, critical minerals, and advanced manufacturing.

The government’s broader strategic aim is to reduce Canada’s reliance on the U.S. market, which still accounts for a large share of exports but is shrinking as a percentage of total trade.

Trade by the numbers: signs of a shift

Recent trade data show a real re‑balancing happening on the ground:

• Canada’s overall trade deficit narrowed recently, driven by stronger exports and weaker imports;

• Exports destined outside the US are growing faster than those heading south;

• However, Canada and Mexico reiterated a commitment to keep the Canada-United States-Mexico (”CUSMA”)’s trilateral agreement intact amid ongoing review negotiations - showing diversification isn’t about abandoning old partners.

What’s driving this big policy shift?

There are two main macro forces behind Canada’s new trade strategy:

1. Heightened geopolitical risk and protectionism

US trade policy volatility - including tariff risks - has underscored how much Canada’s economy is tied to decisions in Washington. Trade diversification is a form of economic risk management. Canada already has agreements with 51 countries covering major parts of the world economy. Expanding this further can protect jobs and investment from disruptions in any one market. A wider base of trade partners may also put less downward pressure on the Canadian dollar if export demand strengthens.

2. Global growth centers are shifting east

The Indo‑Pacific region is becoming the center of global economic growth. By 2040, much of the world’s economic activity and middle‑class consumer demand will be in Asia. Canada has natural comparative strengths (energy, minerals, agri‑food, tech) that align well with this shift. Asia is a key buyer of Canadian energy and critical minerals — demand that could support export revenues and associated equities or commodities exposure.

Practical recommendations

Here’s what you should be thinking about as a Canadian investor or financial planner:

1. Don’t ignore global exposure. Canada’s pivot highlights the importance of thinking beyond North America in investment and retirement portfolios.

2. Sector positioning matters. Industries like tech, clean energy, advanced manufacturing, and critical minerals could be catalysts for returns if international ties deepen.

3. Pay attention to trade policies. Trade agreements take years to finalize and implement — but once in place, they can shift capital flows and competitive advantages.

Canada is at an economic crossroads. The traditional export focus on the United States is slowly giving way to a more diversified global trade strategy that could reshape economic growth, investment flows, jobs, and even currency movements.

Until next time,

- Canadian Money Matters

The cost of groceries keeps rising

Canada has experienced persistent and above-average food price inflation compared with other G7 countries. Some staple items have climbed significantly over the past year. Experts have even described Canada as the “food inflation capital” of the G7 based on recent food price data. And it’s not just a small uptick: independent forecasts project food costs will continue rising in 2026, meaning most households will spend noticeably more at the grocery store.

This dynamic has real impact on household budgets: grocery bills are one of the largest recurring expenses for most Canadians, and many people are adjusting their shopping habits because of price pressures. (If you’re interested, I previously wrote about how the government manipulates inflation numbers based on these behavioural changes.)

What the federal government announced

On January 26th, the Prime Minister and Finance Minister introduced a suite of measures that aim to directly address food affordability. You can read the full announcement here but below is a quick summary.

1. A (not new) Canada Groceries and Essentials Benefit

If you previously qualified for the GST credit (i.e. family income of less than $52,255 or $69,015 with four children), it is being renamed to the Canada Groceries and Essentials Benefit, and is being grossed up by 25% for five years starting in July 2025. This year, in addition to the four quarterly payments in Jan, April, July, and October, there will also be one additional lump-sum payment in the spring of 2026. Combined, this means that a family of four will receive up to $1,890 this year, and about $1,400 a year for the next four years; and a single person will receive up to $950 this year, and about $700 a year for the next four years.

2. Food-supply support

• The government is putting aside $500 million from the Strategic Response Fund to help businesses manage supply chain cost pressures.

• They are also creating a $150 million Food Security Fund which will support small and medium enterprises.

3. Affordability strategy

• They are providing $20 million to the Local Food Instructure Fund, which will support food banks and community food programs.

• They are working on a National Food Security Strategy to strengthen domestic food production and improve retail price transparency.

What this means for your personal finances

• Immediate cash boost: If you qualify for the Canada Groceries and Essentials Benefit, this is extra money that isn’t tied to borrowing or debt, but no-strings-attached cash you can use for groceries, childcare, or savings.

• Inflation still matters: This support does not negate the fact that food price inflation has outpaced general inflation for months. Your grocery budget may still feel squeezed.

• Not a broad tax cut: The government has opted to take on initiatives which 1) aids the lowest income levels rather than all levels evenly, and 2) support supply chain health specifically.

This announcement has come at a time when the Bank of Canada has signaled caution on its interest rates (keeping its benchmark rate steady) and Canadians are increasingly wary of ongoing inflation pressures. Food costs are now a major factor in everyday budgeting decisions, and policy changes like these are part of how the government is responding.

Until next time,

- Canadian Money Matters

The Bank of Canada has taken a chill pill

One of the main factors affecting mortgage interest rates is the Bank of Canada’s benchmark overnight interest rate. The overnight interest rate is the rate Bank of Canada wants banks to charge each other for their inter-bank borrowings. You’ll never be paying interest rates as low as these, because banks are very creditworthy borrowers, and an overnight rate is the shortest possible timeframe for them to borrow.

The Bank of Canada typically makes eight interest rate announcements every year on a fixed schedule. Throughout 2025, the bank made four total 25 bps (that’s 0.25%) cuts to the overnight interest rate. By the last meeting of the year on December 10th, they held their overnight rate steady at 2.25%, and most experts think they’ll continue to keep this rate for a while.

Does this mean the economy is doing well?

Actually... yes. The Bank of Canada typically moves their overnight interest rates around to deal with inflation. When inflation is too high (i.e. economy is running too hot), they will raise their overnight rates in order to slow down everyone’s borrowing and spending activities. When inflation is too low (i.e. economy is sluggish), they will lower their overnight rates to give the economy a boost and hope to ward off a recession. So what does it mean if they held their overnight rate in the last meeting and experts are thinking they will continue to hold? It means we’re in the cozy economic Goldilocks zone, baby! The Bank of Canada is essentially announcing that they don’t think moving the overnight rate around will help the economy is any way.

What does this mean for those with a mortgage?

The Bank of Canada’s overnight rate affects the prime lending rate, which is the benchmark banks use to determine the interest rate for its variable loans. At a 2.25% overnight rate, the prime lending rate is currently 4.45%. Your variable-rate mortgage is at a spread to that, for example prime - 0.50% which would be 4.45% - 0.50% = 3.95%. So the overnight rate staying put = the prime rate stays put = your variable-rate mortgage interest will be staying put.

And if you’re looking to refinance? As long as your initial rate was locked in pre-2023, now’s probably a good time to refinance, and you can feel relatively safe in making the decision because interest rates are not expected to drop further.

What does this mean for renters?

Even if you’re not paying interest on a mortgage right now, it’s likely your landlord is. Stable rates = stable rents!

What does this mean for investors?

You never know with the market, but a calm rate environments usually keeps markets less jumpy, so you can expect lower volatility.

What does this mean for those with debt?

Predictability is the current vibe. Budgeting should be easier when your monthly costs don’t change on a whim.

If you found this helpful (or just more digestible than a Bank of Canada press release), please share with a friend. Let’s make personal finance the conversation at more dinner tables.

Until next time,

— Canadian Money Matters