2025-2029 Surrey Financial Plan

ECONOMIC OVERVIEW

by 10.0% since March of this year. The sell off in the bond market was highly unusual as investor capital tends to flee to safe-haven investments such as bonds during time of uncertainty. As demand for US government bonds falls, the yield or interest rate on the bonds increase, which leads to higher financing costs. This increased cost of borrowing will trickle down to consumers, businesses loans and government debt. It is widely believed that the US administration backed down from its tariff stance due to market volatility. The US administration exempted Chinese smartphones, computers and semiconductors from tariffs two days after they were introduced, a significant benefit to big technology firms such as Apple, Nvidia, and Microsoft who rely heavily on Chinese-manufactured goods. China applauded the exemption as a good first step to trade war de-escalation. However, the trade tensions continued to escalate as the US administration announced that the exemptions are temporary, and that these products will ultimately fall into a different tariff category. Economists cautioned that the Trump administration’s vision of “reshoring” manufacturing back to the US will take years to achieve due to the time required to reskill the workforce and build infrastructure. Countries around the world have had varying responses to increased US tariffs. The EU, representing 27 countries, attempted negotiations with the US offering a “zero for zero” tariffs scheme where industrial trade between countries would not be subject to any tariffs. China responded with “tit-for-tat” tariffs, while Canada employed targeted tariffs on select industries. Many countries are choosing to approach the US for trade negotiations in the hopes of receiving tariff relief. The US President has warned countries against enacting retaliatory tariffs, threatening the application of even more US tariffs in response. CANADA The Bank of Canada (“BOC”) held its key interest rate at 2.75% during the April meeting, the bank’s first pause since commencing the easing cycle last year. The central bank has trimmed interest rates by 2.25% since last June due to retreating inflation. Canada’s CPI growth in March was 2.3%, down from the prior month’s reading of 2.6%. Statistics Canada attributed the decline to falling gas prices, lower by 1.6%, and travel costs, down

4.7%, which together outweighed the 3.2% year-over-year rise in food prices.

Interest RatesTrend

8.0

7.0

6.0

5.0

Canada’s unemployment rate came in at 6.7% in March, rising by a full percentage point over the last year. As the unemployment rate ticks up, wage growth has slowed. Average hourly wage growth was 3.6% in March of this year, compared to

4.0

3.0

2.0

1.0

0.0

Prime Rate

BOC Key Interest Rate

Source: Bank of Canada

City of Surrey | 2025—2029 Financial Plan | Financial Overview

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