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 will decide whether to raise its policy rate from 2.25 per cent, a move that would directly increase borrowing costs for millions of Canadians
- Tiff Macklem indicated the central bank’s decision hinges on whether inflation, at 3.1 per cent in September, will return to the 2-per-cent target within six to twelve months
- Canadian households carry a record $2.64-trillion in consumer debt, amplifying the impact of any interest rate increase on disposable income and spending
- Homeowners with variable-rate mortgages and home equity lines of credit will pay more in interest if rates rise, reducing funds available for other expenses
- Mortgage delinquencies are increasing in Ontario, Prince Edward Island, and British Columbia, with homeowner bankruptcies reaching their highest level since 2016
- Unemployment rose by 68,000 jobs lost in September after a 42,000 decline the prior month, compounding pressure on household finances
- Food bank usage has more than doubled since 2019, with 2.35 million monthly visits and nearly 20 per cent of users employed, highlighting widespread financial strain
Why it matters: Raising rates risks deepening financial hardship for millions of indebted households just as job losses mount and food insecurity surges, making the cost of hitting the 2-per-cent inflation target potentially greater than the benefit, especially when inflation is driven by external energy shocks rather than domestic demand.
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