As I have been pointing out…years of easy money and housing speculation have left Canada’s economy between a rock and a hard place. Shelter costs (28% of Canadian CPI) are inflating as mortgages come up for renewal month after month. Households are cutting spending significantly in response.

The result is stubborn shelter inflation and slowing economic growth with rising layoffs and spreading financial strife. While the Bank of Canada can cut short-term rates, there is no quick fix here. Cutting to zero quickly would signal panic and throw more fuel on price inflation. The mandate of price stability needs policy rates to stay well above the zero bound and in line with pre-GFC historic averages. And the masses are ill-prepared.

James Orlando, director and senior economist at TD Bank, joins BNN Bloomberg to talk about three scenarios for shelter inflation depending on when the BoC starts cutting rates. Here is a direct video link.