Looming rate hike raises the question: Is it better to battle inflation or win the trade war? — SkimNews
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- Bank of Canada must decide Wednesday whether to keep its policy rate at 2.25% or launch a possible series of increases; Tiff Macklem framed the calculation around whether September’s 3.1% inflation returns to the 2% target within six months to a year.
- Canadian borrowers with variable-rate mortgages and lines of credit secured by home equity would pay more interest, while fixed-rate mortgage renewers are already facing higher rates in anticipation of a Bank of Canada move.
- Higher interest rates would make mortgage qualification harder for homebuyers, likely depress home prices, give builders more reason to shelve projects and raise business borrowing costs as aggregate demand weakens.
- TransUnion reported that Canadian consumer debt reached a record $2.64 trillion, a balance that amplifies the effect of any Bank of Canada increase on household finances.
- Mortgage holders face rising delinquencies in Ontario, Prince Edward Island and British Columbia, while one Ontario consumer insolvency firm reports the highest number of homeowner bankruptcies it has seen since 2016.
- Statistics Canada recorded 68,000 job losses in September after a 42,000 decline the previous month; unemployment remained 6.5% nationally as real income growth softened.
- Food Banks Canada reports 2.35 million food-bank visits a month, with usage more than doubled since 2019 and almost 20% of users holding jobs.
Why it matters: The distributional cost is immediate: Canadian borrowers on variable mortgages and home-equity lines would pay more interest, while fixed-rate renewers already face higher rates in anticipation. With $2.64 trillion in consumer debt, more household income would go to debt service, leaving less for consumption and efforts to address the trade war.
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