In a vacuum, central banks slash interest rates to encourage borrowing and investing to stimulate a sluggish economy, and they raise rates when they want to cool down an overheated economy.
Just as many other countries did, Canada reduced lending rates in the early days of the COVID-19 pandemic. But those record-low borrowing rates have contributed to rising inflation, which is what’s prompting the central bank to change direction.
While the cost of living is already at its highest rate in 30 years, the central bank says it doesn’t think things have peaked just yet, saying in a statement on Wednesday that inflation “will likely move even higher in the near term before beginning to ease.”
The hike brings the bank’s rate within a quarter of a point of the 1.75 per cent level it was at before the pandemic, and the bank made it clear in its statement that several more rate increases are planned.
“With … inflation persisting well above target and expected to move higher in the near term, the [bank] continues to judge that interest rates will need to rise further,” the central bank said in a statement.
The bank’s decision will increase borrowing rates for variable rate loans such as mortgages and other lines of credit.
John Marsh, the owner of Elecompack Systems Inc., an office supply store in Oakville, Ont., has variable rate loans attached to his business and says higher interest rates are starting to bite. (Craig Chivers/CBC)
That’s going to impact people like John Marsh, the owner and operator of Elecompack Systems Inc., an office supply store and label maker based in Oakville, Ont.
When the pandemic hit, Marsh said, he saw his sales plunge by about 40 per cent, so like many business owners, he borrowed some money to stay afloat to ride out the storm. While he’s pleased his business is now turning a profit again, this week’s rate hike will stretch his budget even further.
“I have several loans with a variable rate, and every time the rate changes, it has an impact on us,” he told CBC News in an interview.
Marsh estimates that Wednesday’s 50-point hike will probably raise his debt payments by a few hundred dollars a month. “It’s going to be at least six years before we recover fully,” he said. “Anything right now that makes it harder to recover is not a good thing.”
Impact on housing market
While consumers and businesses with variable rate debt will feel the higher rates, the biggest impact will likely be on Canada’s housing market.
Cheap lending rates fuelled a breathtaking rise in Canada’s housing market during the pandemic, but the wind appears to be coming out of its sails of late as the central bank signals the era of cheap money is coming to an end.
The national average house price has fallen for two months in a row and is expected to fall further. While that’s obviously concerning for sellers and potentially good news for buyers, Toronto mortgage broker Samantha Brookes said absolutely everyone will be impacted by this week’s rate hike, no matter what part of the market they are in.
While lower prices may help buyers, many are finding that their mortgage will cost more than they expected, she told CBC News in an interview.
“These low rates are now gone, they’re totally off the table,” Brookes, the CEO of Mortgages of Canada, said, “and people just have to be more aware of how much this is going to increase their cost per month.”
Similarly, owners who had banked on a king’s ransom when selling their home are having to adjust their expectations downward, but even those with no plans to sell are feeling the pinch.
Toronto mortgage broker Samantha Brookes, the CEO of Mortgages of Canada, says both buyers and sellers will be impacted by this week’s interest rate hike. (Craig Chivers/CBC)
Brookes gives the example of owners who bought years ago when mortgage rates of one or two per cent were easy to find. Today, those owners’ mortgages are up for renewal, “and the interest rates are in the four per cent range, [so] they can no longer afford the mortgage,” she said.
Those owners are finding themselves having to stretch their mortgages over a longer time period to bring the monthly payment down to something they can afford. While the process of adjusting to higher rates will be painful, Brookes said it will be good for everyone in the long run.
“It’s time for us to start bringing those rates back to where they used to be,” she said.
MONTREAL – One expert says entry-level pay under the tentative deal between Air Canada and its pilots could be a stumbling block ahead of a union vote on the agreement.
Under their current contract, pilots earn far less in their first four years at the company before enjoying a big wage increase starting in year five.
The Air Line Pilots Association had been pushing to scrap the so-called “fixed rate” provision entirely.
But according to a copy of the contract summary obtained by The Canadian Press, the proposed deal announced Sunday would merely cut the four-year period of lower pay to two years.
John Gradek, who teaches aviation management at McGill University, says as many as 2,000 of Air Canada’s roughly 5,200 active pilots may earn entry-level wages following a recent hiring surge.
After the airline averted a strike this week, Gradek says the failure to ditch the pay grade restrictions could prompt pushback from rank-and-file flight crew and jeopardize the deal, which is up for a vote next month.
This report by The Canadian Press was first published Sept. 18, 2024.
ROME (AP) — Salvatore “Totò” Schillaci, the Italy striker who was top scorer at its home World Cup in 1990, has died. He was 59.
Schillaci had been hospitalized in Palermo following treatment for colon cancer.
The Palermo Civico hospital said in a statement that Schillacci died on Wednesday morning after being admitted 11 days ago.
Schillaci scored six goals for Italy during the 1990 World Cup. He came on as a substitute during Italy’s opener against Austria, scored in a 1-0 victory, and went on to earn the Golden Boot awarded to the tournament’s top scorer. He only scored one other goal for Italy in his career.
Italian soccer federation president Gabriele Gravina announced that a minute of silence would be held in memory of Schillaci before all games in the country for the rest of the week.
“The uncontrollable celebrations, in which his face was the symbol of shared joy, will remain forever part of Italian soccer (history),” Gravina said. “Totò was a great player, a symbol of tenacious desire and redemption. … His soccer was full of passion. And that fearless spirit made everyone appreciate him and will make him immortal.”
Schillaci also won the Golden Ball award at the 1990 World Cup as the tournament’s top player ahead of Lothar Matthaus and Diego Maradona.
Schillaci played for Messina, Juventus, Inter Milan and Japanese team Jubilo Iwata during his club career.
“You made an entire nation dream during the Magical Nights of Italia ’90,” Inter said on its social media channels.
West Germany won the 1990 World Cup, beating Argentina in the final, while Italy beat England for third place with a winning penalty kick from Schillaci.
Roberto Baggio, who scored Italy’s opening goal in the third-place match, wrote on Instagram, “Ciao my dear friend.”
Having been born and raised in Palermo, the Palermo soccer team announced that it would hold a public viewing of Schillaci at its Renzo Barbera stadium ahead of the funeral, the Gazzetta dello Sport reported.
French soccer player Wissam Ben Yedder will stay free ahead of his trial on charges of sexual assault while intoxicated, one of his lawyers told The Associated Press on Wednesday.
Marie Roumiantseva said Ben Yedder will remain under strict judicial supervision after a woman filed a lawsuit for sexual assault earlier this month.
The 34-year-old Ben Yedder, a prolific striker in the French league, was briefly detained then released after the alleged incident in his car on the French Riviera. Ben Yedder had been stopped by police after he first refused to do so. He was then put in a jail cell.
After he was summoned to appear in court on Oct. 15 and placed under judicial supervision, the Nice prosecutor’s office appealed the decision not to remand the player in custody. The investigative chamber of the Court of Appeal of Aix-en-Provence did not grant this request and kept Ben Yedder under judicial supervision.
Ben Yedder attended a hearing Tuesday during which he offered to go to rehab. He has admitted he drove while under the influence of alcohol but has denied any sexual assault.
In a separate legal case last year, Ben Yedder was charged with “rape, attempted rape and sexual assault” over another alleged incident in the south of France.
Ben Yedder has been without a club since his contract with Monaco expired at the end of last season.
