The Bank of Canada needs to take out insurance tomorrow, and it's a safe bet it will.

The BoC is trying to contain at least four risks:

• Core CPI lingering in the 3% range
• Inflation expectations getting stuck in the 3% to 4% range
• Counter-productive housing momentum
• An employment resurgence.

The Big 6 banks' crack econ teams (all of them) now project a hike on Wednesday. The #OIS# market is slightly less convinced, however. It's only got the likelihood at 68%. But, next-meeting probabilities over 65% are typically worth betting on.

Another increase would give our overnight rate a 5-handle for the first time since 2001. That's double the BoC's average #neutral rate# estimate—i.e., we're in highly restrictive territory.

A mere 15 out of 10,000 people are 90+ days behind on their mortgage, according to CBA data released last week.

That number is historically tiny. Yet, it's been this way for so long that it no longer impresses most people.

It should, though. Lenders in 1992 or 1997 would have killed for arrears that low, let alone lenders in the 1980s.

The pace of fixed rate increases has slowed these past seven days, but the damage has been done. Canada's #4-year swap# rate—a leading fixed rate indicator—is up 100 basis points in just two months.

Whether you're a mortgage shopper, realtor or mortgage seller, these are un-fun times. In just five weeks, the lowest nationally-available uninsured 2-year fixed rate is up 80 bps. The lowest 5-year fixed is 70 bps higher.

Typical Canadians think inflation is dramatically higher than it is. That's a problem when you're a central bank trying to convince people you're bringing inflation back to 2%.

The bank's latest data also reveal that both consumers and businesses expect inflation to remain almost double the target two years from now.

It's enough to make you want to crush inflation expectations with another hike next week. And that's exactly what Team Macklem may do.

The latest #OIS# pricing implies a 54% hike probability for the July 12 meeting. And that may be low given limited improvements in the BoC's areas of concern: "excess demand, inflation expectations, wage growth and corporate pricing behaviour." Albeit, Friday's crucial jobs data could trump all of that.

The BoC's closely watched consumer survey was a mixed bag in other respects:

Few have influenced Canada's mortgage broker market more than Scotiabank's John Webster. He's been an undying advocate for our channel for over three decades, with one of Canada's leading banks to boot. And now he's retiring.

With Scotiabank having pulled back from the mortgage market, Webster's departure leaves questions about the bank's future direction in the channel, some of which we'll answer here.

But first, here's a look at a legend in our space who helped make mortgage brokers more relevant.

What he did

We can now officially report that BMO will resume selling mortgages through brokers.

As MLN broke on May 12, BMO is re-entering the channel it departed in 2007. The bank is easily the most recognized lender to partner with brokers in years.

We spoke with BMO's Head of Home Financing and Personal Lending Products, Hassan Pirnia, for the hot skinny on this most-excellent news. Here's what he told us...

On when BMO will launch

"Paying less principal, or in some cases no principal, is not a sustainable practice," Canada's bank regulator told MLN Tuesday.

Yet, that's precisely what hundreds of thousands of fixed-payment variable-rate mortgagors are doing.

In fact, paying all your interest due each month is optional at some banks (e.g., CIBC) in cases where rates have risen so much that one's fixed payment doesn't cover all the interest.

In many cases, this extends effective amortizations well beyond 40 years, creating "increased risks, including a greater persistence of outstanding loan balances (keeping borrowers in debt longer) and greater risks of loss to lenders," the regulator says.

Capital requirements now under a microscope

Canada's inflation rate landed precisely where the consensus thought: 3.4%. That's down 1%-point from the 4.4% print last month.

While Bay Street expected it, most laypeople didn't. That's key. Inflation is now in the 3's for the first time in 22 months. That's a significant relief from 8.1% last June. If consumers believe CPI is dropping this fast, they're less prone to aggravate inflation by front-running purchases and demanding higher pay.

Here's the highlight reel from today's report:

• CPI increased a scant 0.1% m/m, so it wasn't all about base effects this time.
• Core inflation finally dipped below 4%, with the BoC's two main measures easing to 3.9% annualized on average (+0.2% m/m).

• The BoC's favoured 3-month core measure slowed 20 bps to 3.6%. That's meaningful progress, but 3.6% is still not 2.0%.
• One sobering stat was 3-month "core services excluding shelter"—a measure the BoC has grown fond of this year. It went the wrong way, accelerating 20 bps to 4.9%.

• We have one more easy comp (June 2022's 0.7% m/m print), and then comparables get tougher for a while—so tough they could slow CPI's progress until the January report in February 2024.

• The mortgage interest cost index—3.8% of the CPI basket—jumped almost 30% (+29.9%). It was the "largest contributor to the year-over-year CPI increase," said StatsCan. The agency was quick to point out that "Excluding mortgage interest cost, the CPI rose 2.5% in May, following a 3.7% increase in April.” Now, guess who influences mortgage costs the most in this country. That's right, the people fueling this index are the same people who need CPI lower.
• Various economists today are now reaffirming their view for sub-3% headline inflation before year-end, potentially even next month.
• Odds are, Tiff & Co. will whack borrowers once more. #OIS# probability is 57% for another hike on July 12, but let's see how employment data shakes out next week. Implied chances of an additional hike before year-end fell to 1 in 3 after today's CPI.
• Desjardins Economics rate analyst Royce Mendes, one of the least wishy-washy guys in the talking heads business, summed up the BoC's stance as:
  "With measures of recent price growth continuing to run above 3 ½%, it looks almost like a done deal that the Bank of Canada will raise rates another 25bps in July."
• Canada's 5-year yield was down one bps as of 10:30 a.m. ET today, despite the U.S. 5-year being up five bps. If the July 7 jobs report shows worsening unemployment and we get no more hawkish developments out of the U.S. through next week, there's still a chance 2023 5-year yields could top out below last October's high.