Pattie Lovett-Reid

Chief Financial Commentator, CTV

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Canadians are frustrated as we kick off the third calendar year of the pandemic.

Lockdowns, restrictions, higher prices for just about everything; and, if that isn't enough, there’s also a steadily increasing number of absences in the workplace due to higher infection levels and of course school closures.

Our physical and mental health are deteriorating and for many the situation goes beyond a perfect storm brewing. Many likely feel their household is in the midst of a tornado spiralling out of control. Any one of these challenges would be difficult, however, combined they are wrecking havoc on just about every element of our lives.

Sadly, this feeling isn't unique to only Canadians. Recent data out of the U.S. indicated inflation rose seven per cent in December year-over-year - the highest level since 1982.

Some hope this is the peak and it may well be, but a number that high is still a concern.

At the confirmation hearing of U.S. Federal Reserve Chair Jerome Powell, he pointed out that higher inflation was a barrier to achieving maximum employment and higher rates would create stability and allow for more Americans to get jobs.

This makes sense to me.

You have to believe the same applies here in Canada. In a recent survey conducted by

Nanos Research Group for Bloomberg News, almost nine in 10 Canadians indicated soaring prices are more of a concern than higher interest rates.

Does the Bank of Canada need more encouragement from Canadians than that to start to move rates higher?

Royal Bank of Canada Chief Executive Officer Dave McKay echoed Canadians’ endorsement of higher rates, telling Bloomberg News, "We need rapid action this spring as a series of rate increases addresses [permanent sustained inflation]."

Currently, the market is pricing in five rate hikes this year by the Bank of Canada. I say bring them on.

Would higher rates be such a bad thing? I don't think so. The current Bank of Canada rate is 0.25 per cent and could potentially hit approximately 1.5 per cent in 2022, a paltry number compared to inflation north of five per cent.

Moving on rates ironically would put more money in your pocket.

Our economy may have ended 2021 on a strong note, however, with the recent Omicron outbreak the service sector will be slammed again in terms of activity and employment, absenteeism and school closures will weigh on our economic growth in the first quarter.

If we can finally catch a break, restrictions and infections could subside in February and we all hope this setback is simply another detour on the road towards recovery.

The optimist in me believes inflation is getting close to peaking and higher rates could help to balance out the housing market while day-to-day living expenses could start to tick lower.

Canadians are fatigued and overwhelmed. Fingers crossed there is light and relief, even if by way of higher rates, at the end of this very long tunnel.