People should look at adjusting budgets with Bank of Canada interest rate hike: MNP Calgary

People in Calgary and across Canada are expected to feel the effects of the Bank of Canada’s move to increase its key interest rate by a full percentage point to 2.5 per cent in a dramatic effort to cool inflation.

“The Canadian economy is overheated. There are shortages of workers and of many goods and services. Demand needs to slow so supply can catch up and price pressures ease,” said Bank of Canada Governor Tiff Macklem.

Bank of Canada Governor Tiff Macklem speaks at a press conference in Ottawa, June 9, 2022. THE CANADIAN PRESS/ Patrick Doyle

This is the biggest rate increase since 1998.

Analysts had expected an increase of three-quarters of a point.

With inflation standing at 7.7 per cent and expected to hit eight per cent before the end of the year, the impact will be felt by consumers, businesses and homeowners.

Canadians with variable mortgage rates will feel the pinch.

Those holding a $300,000 mortgage should expect to see an increase of $160.48 a month.

A $213.98 monthly increase is expected for a $400,000 mortgage and an extra $267.47 for those holding a half a million dollar mortgage.

Sixty-eight per cent of Albertans were already concerned about increasing interest rates, according to accounting firm MNP’s consumer debt index survey from last month.

It also found Albertans were cutting back on some of the essentials in order to save.

Donna Carson with MNP in Calgary said it’s something more people may need to consider.

“We need to sit down, take a look at the budget that we had last created and then setting new targets, new goals. Budgets aren’t something that are set,” Carson said.

Conservative MP Michelle Rempel Garner for Calgary Nose Hill is calling on Ottawa to come up with a plan to address issues that have led to inflation, like the global food shortage, rising fuel costs and housing affordability.

Calgary Nose Hill MP Michelle Rempel Garner hinted at a possible UCP leadership bid Wednesday on social media

“We can’t just be relying on Canadians to pay more. We also have to be looking at some of these other issues that need to be addressed so we can have a sustainable plan for the future,” Rempel Garner said.

Prime Minister Justin Trudeau says the government is offering support to struggling Canadians.

“We know that families are struggling, that’s why as a government, we made a promise to have people’s backs and we have continued to make investments to support families,” he said.

However, the rising cost of living is showing no signs of slowing down.

Canadian food suppliers are once again issuing notices to grocery stores about upcoming price hikes.

Dairy is one of the grocery cart items set to see an increase.

The Bank of Canada signalled that rates will not come down anytime soon - not this year and not to the bank’s two per cent target before 2024.

With that, many experts expect that will see further increases before the end of the year.