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Amidst all the economic noise and reports we're bombarded with daily, inflation data reigns supreme.

The monthly CPI report is the Bank of Canada's North Star, and yesterday, the cosmos smiled upon us with a twinkle that could signal lower rates.

​​Canadian inflation limboed under expectations for the second straight month, setting the stage for what could be a rate cut premiere this summer.

Forward rates are popular reference points that reflect the "smart money's" expectations for future interest rates.

Who is the smart money? Think big institutional investors with deep pockets.

For decades, investors have used forward rates to predict future rates. Despite the market's flaws, few rate prediction sources are more objective and credible. At a minimum, it beats your uncle's gut feeling at Easter dinner.

Forward rates are also helpful when running borrowing cost scenarios and assessing potential mortgage affordability challenges.

But forward rates are often misunderstood. If you want a better feel for how markets anticipate rate direction changes, watch this fascinating video. It's based on American futures, but the principle also holds for Canadian rates.

When times are tough, more people do stupid things.

One thing some do is intentionally misrepresent themselves on mortgage applications to get approved.

This kind of fact-fudging surged almost 10% y/y in Q4 2023, Equifax reported this month.

"The Fed pivot in December has triggered an easing in financial conditions which can no longer be ignored," says private equity giant Apollo Global Management. As a result, the firm sees no Fed rate cuts this year.

It's a minority view, but Apollo's not alone. More contrarians have come out of the woodwork, maintaining that rates are renormalizing around today's higher levels. They're flagging everything from fiscal over-stimulation, housing strength, surging population (in Canada, not so much in the U.S.), rate insensitivity in the U.S. (due to 30-year mortgages), sticky inflation expectations, wage pressures, trade frictions, and onshoring—all of which are conspiring to slow disinflation.

The OIS and forward markets—which analysts turn to for rate predictions—are scratching their heads at this unprecedented combination of inflationary forces. There's a nagging concern that markets are not recognizing the inflation beast in the lineup.

If the consensus turns out to be wrong about monetary easing in 2024, it could rewrite the future for people's net worth. Rates are a crucial lever for home values, and home ownership is people's primary method of building wealth.

One can't help but ponder: if 5% mortgage rates theoretically became the new normal, could home prices keep reaching for the stars?

Online mortgage marketers have a big problem. It starts with "Goo" and ends with "gle."