No surprise here. The Bank of Canada has one tool and they will keep hitting everyone with it until they listen. They want to see something break before they stop. Fiscal policy is counter to monetary policy right now, which isn’t helping. I wouldn’t be shocked if we got one more increase by the end of fall.
Inflation is killing us in Canada, a make a good salary and I have to check my spending much more than a mere few months ago.
I can’t imagine how a family with a average or slightly sub average salary is able to stay afloat
It feels like it’s interest rates as a labor disciplining mechanism at this point (other than the fact that it’s basically the only button they have).
High inflation is far worse for most workers than higher interest rates.
Maybe/probably but it’s a false dichotomy. Interest rates are only one mechanism for controlling inflation, and a target coarse one.
Consider housing, increasing the interest rates makes it harder to buy a house, but it also makes it harder to build a house. Since this inflationary spiral we seem to be getting sucked into is at least partly (probably mostly) tied to restricted supply of “the stuff to buy” side if the balance, prolonged high interest rates could lead to stagflation.
This same high inflation also effects capital spending at any company seeking to expand production.
I’m not an economist, and I’m sure you’d get three different answers from two different economists, but I’m thinking we’re getting into that tickle point where interest rate hikes might start putting us into stagflation. Fundamentally, central banks aren’t going to fix this global inflation problem by playing with interest rates. You’re dealing with a real loss in production wrt the pandemic, and now a major land war in a highly agriculturally productive area of the world.
Interest rates are also basically the only major lever the BoC has. At some point the government has to step up with changes aimed at reducing inflation, and so far they’re nowhere to be found.
Say that to the people who will eventual default on their mortgages and lose their homes. Economics is the only social science that behaves as if it were a natural science where everything is self-evident. That’s not to say that low interest rate are inherently good but that the mechanism itself that is used to combat any form of inflation is a very limited tool.
Houses got stupid expensive because interest rates were too low. People bought houses uses cheap debt without considering the possibility that interest rates would go up, and bought houses they couldn’t afford. Interest rates never should have been so low in the first place.
Many people bought homes they could afford, that they needed to live in, after passing a very conservative stress test because that was the way you are supposed to buy a home. Nobody expected the interest rates to more than double in a couple of years. It’s unprecedented. Nobody expected our government to do absolutely nothing about inflation and leave it all to the BoC to fix. You are vilifying and generalizing an entire class of people, most of whom do not fall under the cherry picked description you offered.
Repeat after me: most homeowners are regular people who borrowed responsibly under stringent criteria when they bought their homes.
