Interest Rate Increases will be Painful
March 16, 2022
The Bank of Canada has warned us of pending interest rate increases for a long time. Last week interest rates were increased by one quarter of one per cent.
Many are anticipating six interest rate increases over a relatively short period of time. These increases are necessary to slow down economic activity in order to bring inflation under control.
As borrowing costs increase, many will find it more difficult to make ends meet. We know that a significant number of people live pay cheque to pay cheque, without much room for additional costs.
Plus, inflation means we are paying more for purchases than we have in the past and this too is a burden. Add in Russia invading Ukraine, which is adding additional price increases particularly at the gas pumps.
Personal expenses are escalating quickly. The Bank of Canada acknowledged inflation “is now expected to be higher in the near term than projected in January.”
Consider this fiscal “tough love.” For the good of our country and all Canadians interest rates have to rise. Even though it will hurt many.
Now is the time for individuals to be proactive. Your expenses are increasing, and that upward trend is going to continue over the next year and perhaps longer.
What costs do you currently have that can be reduced or eliminated? Depending on your financial circumstances, you might have to be aggressive at finding areas of savings.
Tough times are ahead.
Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Watson provides wealth management services through Watson Investments. He can be reached at www.watsoninvestments.com