Bank of Canada Battles Inflation with Rate Hikes, Hitting Vulnerable Households

Canada faced high inflation in the 1980s-90s, peaking at 13% in 1980. The Bank of Canada used high interest rates to bring it down.

Recent inflation was caused by pandemic spending and supply chain issues. The Bank of Canada again raised rates, lowering inflation to 3.1% by late 2023.

Higher interest rates hit poorer households harder due to higher food and housing costs. Shelter and food are 45% of Canada's CPI.

20% of mortgages at major banks are negatively amortized from rate hikes. Homeowners hope for rate cuts in 2024.

The Bank of Canada is hesitant to cut rates soon in case it sparks more spending and inflation. Rates may stay high for months until inflation steadies.