Rate hikes are starting to bite, slowing Canada's economy: Economist
A second provincial premier is making a direct appeal to the Bank of Canada to stop raising interest rates.
Ontario Premier Doug Ford issued a social media post on Monday saying he had written directly to the central bank's governor Tiff Macklem the day before. He said his plea was necessary because of the toll current rates are taking on the province's families and businesses.
"Over the last 18 months, we've suffered ten interest rate hikes which have had a devastating impact on people who are already struggling to get by," the letter read.
Ford is now the second provincial leader to voice objections to further hikes after British Columbia Premier David Eby sent a similar letter to Macklem last week.
The Bank of Canada raised its key interest rate to five per cent in July, citing projections suggesting it will take longer for the national inflation rate to reach the bank's target of two per cent.
Ford's letter urges Macklem to "consider the effect higher interest rates are having on everyday people" before the bank announces its next interest rate decision on Wednesday.
“While the Bank of Canada has a mandate to keep inflation low, the latest monthly figures from Statistics Canada show that because of the interest rate hikes, inflation on mortgage costs for Ontario families is now at 30 per cent,” Ford wrote.
“Ontarians simply cannot cope with the higher monthly payments on their homes brought about by repeated interest rate hikes.”
Ford's letter also said Canada's banks are expecting a spike in defaults on loans and mortgages stemming directly from the rate hikes.
The letter goes on to say the federal government should work with provinces and territories to invest in and build critical infrastructure projects rather than raising rates again.
Eby's letter, dated Aug. 31, said people are “hurting” and another rate increase next month might worsen inflation rather than improving the situation.
"People in B.C. are already hurting,” Eby wrote. “In your role as governor, I urge you to consider the full human impact of rate increases and not further increase rates at this time.”
In an unrelated press conference last week, Eby was asked why he reached out to Macklem when the Bank of Canada is an independent entity.
Eby acknowledged that he was the first premier to raise the issue with the Bank of Canada and said he also wrote to the federal government to suggest ways they could “work together to bring down costs that don't involve inflicting this kind of pain on families.”
“I think it is critically important to go on the record to point out to the Bank of Canada that Statistics Canada is saying that the biggest driver of inflation in our country right now is rising mortgage rates,” Eby said.
Eby also wrote to Prime Minister Justin Trudeau last week calling for a targeted approach to fighting inflation, focusing on housing and infrastructure improvements.
The letter to Trudeau said a focus on such key sectors will have long-term anti-inflationary benefits while growing the economy and improving productivity.
The Bank of Canada announces its key policy decision, the setting of interest rates, eight times a year.
Members of the bank's Governing Council observe a blackout no-comment period around the time of the decisions, according to the bank's website.
This report by The Canadian Press was first published Sept. 4, 2023.
-- With files from Dirk Meissner in Victoria