In a reverse chronological order of events, the Bank of Canada’s ten interest rate hikes over the past 18 months have been impacting both businesses and consumers. Today, the Bank faces a decision on whether to further raise interest rates for inflation control or maintain the current overnight rate at 5%.
The swift hikes were originally intended to address the affordability crisis triggered by inflation. However, they have instead aggravated it, leading to increased costs for businesses and a reduction in consumers’ discretionary spending power. The rising costs of essentials like food and fuel, coupled with boosted mortgage costs, have had a significant impact on the rental housing market.
For consumers, these changes have meant higher monthly mortgage payments, making mortgage renewals impossible for some. Many are also cutting back on non-essential spending as a result of these financial pressures.
Businesses too are feeling the pinch. A restaurateur reported increasing prices due to the rising cost of staples like cooking oil, leading to less customer spending.
According to a recent Angus Reid Institute poll, more Canadians are struggling to pay their mortgages due to these interest rate hikes. In March, only 8% found it “very difficult” to pay their mortgage; this figure has now risen to 15%. Similarly, those finding it “tough” to pay their mortgage increased from 26% to 30%.
Ontario Premier Doug Ford (NYSE:) has written letters to Governor Tiff Macklem and Prime Minister Justin Trudeau, urging them to pause on interest rate hikes and federal carbon tax increases in light of these struggles. However, as Ontario Premier lacks influence over the Bank of Canada or Trudeau government’s federal carbon tax commitment, it remains uncertain how this plea will be received.
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