We’ve seen 10 interest rate hikes from the Bank of Canada in just over 18 months, and many Canadians are worried about what’s to come on Wednesday. Then the bank will announce whether it will raise interest rates again to curb inflation or whether it will leave the current overnight interest rate at 5%.
The sharp rise in interest rates has meant that companies that were struggling with out-of-control costs due to inflation are now dealing with rising costs and a decline in business due to high interest rates. The rapid rise in interest rates was intended to address the affordability crisis caused by inflation, but has instead made the situation worse.
Inflation, especially for staples such as food and fuel, remained stubbornly high while the rise in interest rates drove up monthly mortgage costs for many, made mortgage renewals impossible for others and also hurt the rental housing market. It also hurts the purchasing power of consumers, who now have to make decisions and often forego things they once took for granted, such as eating out.
“It’s ups and downs and it’s all due to interest rate increases,” a friend says of his restaurant business.
A few months ago, this independent restaurateur watched prices for staples like cooking oil triple. Since the prices of everything were rising, he had no choice but to raise the prices. Now his customers have less to spend because they have less money left at the end of the month.
He’s not the only one who blames interest rate hikes for changing his customers’ spending habits; the opposite is true. People are going out less often or spending less when they do go out, whether to a restaurant, a special event or even the grocery store.
A new survey from the Angus Reid Institute shows the impact that Bank of Canada interest rate hikes are having on households across the country. In March, only 8% of Canadians said paying their mortgage was “very difficult,” but now that number is at 15%, while the number who say their mortgage is “difficult” to pay has risen from 26% has increased to 30%.
For reasons like these, Ontario Premier Doug Ford has once again waded into the rate hike debate and once again called for a pause. In letters to both Bank of Canada Governor Tiff Macklem and Prime Minister Justin Trudeau, Ford argues that families cannot afford further interest rate hikes.
“Millions of Canadians, including here in Ontario, are already struggling to make ends meet. There is simply no excuse for increasing the already crushing pressure that previous rate increases have placed on so many families and businesses,” Ford wrote to Macklem.
In his letter to Trudeau, Ford called on all levels of government to work together to combat inflation, and he also tried the federal carbon tax. Ford has called for the carbon tax to be abolished, or at least a suspension of annual increases, as Canadians grapple with rising prices.
“The federal government cannot further make the situation worse by increasing a tax that raises the price of everything from fuel to food to electricity,” Ford wrote.
Ford has no influence over the Bank of Canada, and as we have seen, the Trudeau government is sticking with the carbon tax even when polls and its own MPs tell the prime minister it is hurting them politically. So in essence, Ford’s words are little more than a political pose, but hopefully the pose works.
When he spoke out against rate hikes last month, he was joined by Andrew Furey of Newfoundland and Labrador and David Eby of British Columbia. Whether this pressure played a role in the bank not raising rates last month is unknown, but we have to hope it refrains from raising rates again this month.
Canadians can’t afford it.
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