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The Worst Financial Event of 2023

The Worst Financial Event of 2023

December 18, 2023

It’s time to consider how the Bank of Canada (BOC) accomplishes its mandate, writes Peter Watson.

According to its website, its main role is “to promote the economic and financial welfare of Canada.” That is a very important task and I strongly agree with its mandate.

The problem is the way this policy is implemented.

The best way to manage our economy is to concentrate on consumer spending which is the most significant segment of all Canadian economic activity.

When economic activity is too low, the BOC lowers interest rates and that encourages consumers to spend. And spend they do. Purchasing a more expensive house and upgrading household technology, are realities with lower interest rates.

Unfortunately, lower interest rates can cause too much economic activity that causes inflation. High inflation is a significant risk to all Canadians and must be controlled.

Controlling inflation comes from jamming on the brakes of spending and this is done by increasing interest rates. Interest rates have risen significantly in Canada, and many households are trapped with higher interest and mortgage payments than they cannot afford.

There is an expression: “the good, the bad, the ugly.” We are now in the “ugly” stage of the economic cycle.

High interest rates are a form of financial strangulation. Slowly, millions of Canadians are suffocating. Hardship includes losing their house. Suddenly having to relocate while potentially losing any equity they had in their house.

To be fair to the BOC, it must act for the greater good of everyone. Inflation must be controlled.

Is there another way the BOC can fulfil its mandate without causing financial hardship for so many?

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through