Interest rate rises again but some suggest inflation pressures are easing
The cost of paying down debt in Canada went up for the sixth time this year Wednesday, adding a few more dollars to many family's monthly expenses.
The Bank of Canada raised its key interest rate by a half per cent bringing the benchmark rate to 3.75 per cent.
The increase is meant to curb the inflation consumers have been feeling every time they cover basic expenses. When rate increases work, it may cost more to cover your debts, but the products you use each month will cost roughly the same.
"The open question now is how much further does the bank go?" said Trevor Tombe, an economics professor with University of Calgary.
"I think it looks like inflation pressures have eased significantly in recent months so I was looking for the bank to signal that they are close to the end of this tightening cycle, and they didn't," Tombe said.
Trevor Tombe, University of Calgary economist
Nationally inflation meant Canadians spent about 6.9 per cent more on their monthly expenses in September than they did the year before. But because it's measured year over year, the published rate takes time to come down even if prices have steadied over the past few months.
"The high pressures we saw earlier this year are no longer with us," says Tombe.
"The acceleration in inflation that we've seen is largely a supply side story," Tombe says. "That suggests monetary policy is a particularly costly way of addressing it."
In other words, it's the cost of shipping and manufacturing goods that has pushed prices higher, more than high consumer demand.
Much of that has been driven by the fallout of the Russian invasion of Ukraine which has badly disrupted grain and energy markets in Europe.
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