Chrystia Freeland, the minister of finance, warned Canadians on Wednesday that the following months wouldn’t be pleasant as higher interest rates slowed an earlier-than-expected booming economy and led to the loss of some jobs.
Recent rate increases by the Bank of Canada to combat sky-high inflation will make borrowing more expensive for both individuals and businesses, which will have an adverse effect on the entire economy, according to Freeland.
Speaking at a conference for the auto sector in Windsor, Ontario, Freeland pledged to be open and honest with Canadians about the challenges they face, as well as the possibility of rising unemployment and mortgage rates, both of which might harm many households.
“Our economy will slow. There will be people whose mortgage rates will rise. Businesses will no longer be booming. Our unemployment rate will no longer be at its record low. That’s going to be the case in Canada. That will be the case in the U.S. and that will be the case in economies big and small around the world,” Freeland said.
“There are still some difficult days ahead for Canada’s economy. To say otherwise would be misleading.”
The Bank of Canada has been actively hiking rates this year to attain price stability and its 2% inflation objective, similar to other central banks, such as the U.S. Federal Reserve. There is still much to be done. On a year-over-year basis, the Consumer Price Index (CPI) increased 6.9% in September, slightly less than the 7.0% increase noted the month prior.
Experts anticipate further rate increases to lower demand and stabilise the economy as inflation remains very persistent. The current trends may result in a recession by 2023. While energy costs have stabilised in recent months, which has resulted in a slight slowdown in inflation, Freeland warned the government will not be able to help everyone ride the inflationary wave.
“We cannot compensate every single Canadian for all of the costs of inflation driven by a global pandemic and Putin’s invasion of Ukraine,” Freeland said.
However, she pledged assistance for those most at risk from unexpected increases in the price of food and rent in Canada—the poorest citizens. Freeland cited the government’s enactment of Bill C-30, which temporarily doubled the GST credit granted to low-income households.
According to projections from the government, this bill will provide qualified individuals without children with an additional $234 this year, and couples with two children with an additional $467 to help offset escalating costs. The House of Commons is currently considering the C-31 bill, which would also send parents checks to pay for their kids’ dental insurance and offer rent relief.
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