Etienne Bordeleau-Labrecque, Vice President and Portfolio Manager at Ninepoint Partners, spoke with BNN Bloomberg about how investors can approach fixed income investments as the Bank of Canada prepares to announce its next interest rate decision.
As the Bank of Canada prepares for its interest rate announcement this Wednesday, signs point to the central bank maintaining its current rate of 2.75%. Amid a tense global trade environment and economic uncertainty, experts believe there's little reason for a rate change—either up or down.
Etienne Bordeleau-Labrecque, a portfolio manager at Ninepoint Partners, shared his insights with BNN Bloomberg on Tuesday. He stated that the Bank has been clear about its stance. “Governor Tiff Macklem has said several times that we’re in a stable spot,” he said. “Rates have been cut significantly already, and with so much uncertainty, we need to wait and watch.”
According to him, services like housing and transportation are showing signs of cooling, which points to an overall slowdown in the economy. However, goods inflation—especially triggered by trade conflicts—is inching up. That’s making the inflation picture more complicated.
“Core inflation has stayed close to 3% for several months now,” he explained. “That’s not a number the Bank is likely comfortable with.” He also noted that the carbon tax repeal has temporarily lowered the headline inflation number, but deeper economic indicators aren’t moving in the right direction.
The mortgage market tells a similar story. Rates for five-year mortgages have surged—from 3.30% in 2021 to over 6.30% in 2024. Bordeleau-Labrecque hinted that homeowners might see rates climb a little higher in the future. He also explained that while the central bank has already cut rates by 50 basis points this year, long-term bond yields have actually risen.
“If this cutting cycle is over, which it might be, the yield curve could steepen even more,” he said. “If you’ve locked in your mortgage at a fixed rate, especially for five years, that might turn out to be a smart move.”
Trade Tensions Put Pressure on Economy
The looming threat of U.S. tariffs continues to cast a shadow. While several nations, including the EU, Japan, and the UK, have struck trade deals with the U.S., Canada hasn’t yet finalized one. If a deal isn’t reached soon, Canada faces the risk of a 35% tariff on its exports.
“We’ve started to see some price effects filter through, but not dramatically yet,” Bordeleau-Labrecque noted. “Unlike other countries, Canada hasn’t finalized a trade agreement. That could cost us heavily.”
Still, he doesn't believe inflation will surge drastically unless there’s a major disruption. Food and goods prices are inching up, but services—like housing and rentals—are softening in most parts of the country. “Unemployment is sitting at 6.9% nationwide and nearly 8% in Ontario,” he added. “That’s not the kind of labour market that drives runaway inflation.”
He also believes the current rate of 2.75% sits right in the “neutral” zone—not helping or hurting the economy. Instead of monetary changes, he suggests the government focus on supporting specific industries, like steel, copper, and autos, that are the hardest hit by tariffs. “A targeted approach from the government may be more effective than sweeping interest rate changes,” he said.
