Once again, the Bank of Canada has raised its benchmark interest rate — this time to 4.25 per cent — reassuring us that its seemingly unending series of hikes are going to eventually help take the bite out of inflation.
It has a ways to go. Inflation is currently 6.9 per cent and the central bank wants it back at two per cent.
But for many Canadians, all they’ve seen is gas and food and just about everything else stay more expensive than ever, while mortgage rates soar.
CBC News readers have asked: So how is increasing interest rates actually supposed to be helping? According to economists, making it tougher to afford things is part of the plan.
Why is the Bank of Canada increasing interest rates so much?
That’s around where it’s been in Canada for the past 25 years.
But about a year ago, inflation started to rise — and rise, and rise — due to several factors, including supply chain issues that resulted from pandemic lockdowns, the war in Ukraine and climate change.
To get it down, Governor of the Bank of Canada Tiff Macklem says interest rates must go up.
“It’s a bit counterintuitive for Canadians,” he told CBC’s Peter Armstrong last month.
“Their rent’s going up, their groceries are more expensive, gasoline is more expensive. And now their borrowing costs are more expensive. So how does that work? Well, that does slow spending. That makes anything you buy on credit more expensive. So you you pull back and that helps get the economy balanced and that’ll relieve those price pressures.”
And that’s the whole point.
The Bank of Canada wants people to buy less stuff and slow the economy down. When the economy slows down, it says, prices will come down.
At the same time, there is a tacit acknowledgement that it’s going to hurt.
“Our economy will slow as the central bank continues to step in to tackle inflation,” said Finance Minister Chrystia Freeland in October.
“There will be people whose mortgage payments will rise. Business will no longer be booming in the same way it has been since we left our homes after the COVID lockdowns and went back out into the world. Our unemployment rate will no longer be at its record low.”
Bank of Canada governor explains how far he’s willing to go to get inflation under control
In a wide-ranging interview, Bank of Canada governor Tiff Macklem says Canadians should expect more interest rate hikes, and a mild recession is possible, as the central bank continues its fight against inflation.
How does raising interest rates slow inflation?
Macklem says the economy is still “overheated” — with demand high and supply low. And the difference between the two drives prices up.
So in the central bank’s reasoning, if it can get demand down — get Canadians to want to buy less — that pressure on supply will ease.
“We do need to slow the economy,” he said. “We don’t want to over-slow it. We don’t want to make this more difficult than it has to be.”
But at the same time, he said, if they do it in a half-hearted way, it will just prolong the pain.
Won’t it just make it harder to pay my mortgage or utilities and buy necessities like food and gas?
For now, yes. And Sheila Block, senior economist at the Canadian Centre for Policy Alternatives, points out that inflation has a really different impact depending on a person’s income level.
“The cost of food, rent, gas — all of those have paced above the overall [consumer price index] rate,” she told Power and Politics.
“And that is really going to have a tough impact on those lower-income people who spend a larger share of their income on those essentials. And also people who don’t have that kind of cushion to ride this out.”
Could this be the final rate hike from the Bank of Canada?
Sheila Block, senior economist at the Canadian Centre for Policy Alternatives, and Jean-François Perrault, chief economist at Scotiabank, joined Power & Politics Wednesday to discuss the Bank of Canada’s seventh rate hike of the year.
Is hiking interest rates the only way to get inflation down?
Not according to economist Jim Stanford. The director of the Centre for Future Work told CBC News that a broader mix of policies is needed.
“I think that our tool-kit itself needs a more diverse set of tools.”
Stanford says the government needs to introduce longer-term structural policies to address what he calls “the true causes of this inflation” which he says include “supply chains, energy price shocks, and the housing crisis in most parts of Canada.”
Rate hikes have had ‘zero impact’ on inflation, says economist
Jim Stanford, director of the Centre for Future Work says raising interest rates is not the only way to tackle inflation in Canada.
He says raising interest rates will do nothing to help global supply chains.
“In fact, they’ll probably make things a little bit worse because they discourage investment in new capacity and infrastructure by businesses,” he said on the CBC podcast Front Burner.
“What they will do, though, is basically throw a giant bucket of ice water over the entire economy. And we’re already seeing the signs are that we’ve seen a dramatic slowdown in employment growth. We’ve seen a dramatic slowdown in GDP growth. And this is just the beginning.“
He says it would be more effective to try and cool off “the least productive sort of froth in the economy,” such as the housing market. He suggests making better use of rules on mortgage insurance and stress tests “to cool off the property bubble without having to hammer the whole economy with higher interest rates.”
I’m hearing this slowing of the economy could send Canada into recession.
Some economists are indeed suggesting that Canada could be headed for a recession in 2023.
The good news is, he also thinks it won’t be deep or long, citing the country’s strong labour market and low unemployment as reasons why Canada will do better than other countries.
WATCH | Everything you want to know but about a recession but were afraid to ask:
Macklem is optimistic, too.
“This is the biggest test we’ve ever had. But monetary policy works. It takes time to work. And we do have to go through a difficult adjustment.”
But he insists Canada will come out of it.
“Growth will pick up. We’ll have solid employment growth and we’ll have low inflation.”
MEXICO CITY (AP) — Schools in Mexico will have six months to implement a government-sponsored ban on junk food or else face heavy fines, officials said Monday.
The rules, published on Sept. 30, target products that have become staples for two or three generations of Mexican schoolkids: sugary fruit drinks sold in triangular cardboard cartons, chips, artificial pork rinds and soy-encased, salty peanuts with chile. School administrators who violate the order will face fines equivalent to between $545 and $5,450, which could double for a second offense, amounting to nearly a year’s wages for some of them.
Mexico’s children have the highest consumption of junk food in Latin America and many get 40% of their total caloric intake from it, according to the U.N. Children’s Fund which labeled child obesity there an emergency.
The new ban targets products that have become staples for two or three generations of Mexican schoolkids: sugary fruit drinks sold in triangular cardboard cartons, chips, artificial pork rinds and soy-encased, salty peanuts with chile.
President Claudia Sheinbaum said Monday schools would have to offer water fountains and alternative snacks, like bean tacos.
“It is much better to eat a bean taco than a bag of potato chips,” Sheinbaum said. “It is much better to drink hibiscus flower water than soda.”
However, the vast majority of Mexico’s 255,000 schools nationwide do not have free drinking water available to students. According to a report in 2020, the effort to install drinking fountains succeeded in only about 10,900 of the country’s schools, or about 4% of them. Many Schools are located in areas so poor or remote that they struggle to maintain acceptable bathrooms, internet connection or electricity.
Also the most common recipes for beans, refried beans, usually contain a significant dose of lard, which would violate rules against saturated fats.
Mexico instituted front-of-package warning labels for foods between 2010 and 2020, to advise consumers about high levels of salt, added sugar, excess calories and saturated fats. Some snack foods carry all four of the black, octagonal warning labels.
But under the new rules, schools will have to phase out any product containing even a single warning label from school snack stands. It wasn’t immediately clear how the government would enforce the ban on the sidewalks outside schools, where vendors usually set up tables of goods to sell to kids at recess.
Mexican authorities say the country has the worst childhood obesity problem in the world, with about one-third of children overweight or obese.
NEW YORK – Florida Panthers centre Sam Reinhart was named NHL first star of the week on Monday after leading all players with nine points over four games last week.
Reinhart had four goals, five assists and a plus-seven rating to help the Stanley Cup champions post a 3-0-1 record on the week and move into first place in the Atlantic Division.
New York Rangers left-winger Artemi Panarin took the second star and Minnesota Wild goaltenderFilip Gustavsson was the third star.
Panarin had eight points (4-4) over three games.
Gustavsson became the 15th goalie in NHL history to score a goal and had a 1.00 goals-against average and .962 save percentage over a pair of victories.
This report by The Canadian Press was first published Oct. 21, 2024.
CLEVELAND (AP) — Deshaun Watson won’t finish the season as Cleveland’s starting quarterback for the second straight year.
He’s injured again, and the Browns have new problems.
Watson ruptured his right Achilles tendon in the first half of Sunday’s loss to Cincinnati, collapsing as he began to run and leading some Browns fans to cheer while the divisive QB laid on the ground writhing in pain.
The team feared Watson’s year was over and tests done Monday confirmed the rupture. The Browns said Watson will have surgery and miss the rest of the season but “a full recovery is expected.”
It’s the second significant injury in two seasons for Watson, who broke the glenoid (socket) bone in his throwing shoulder last year after just six starts.
The 29-year-old went down Sunday without being touched on a draw play late in the first half. His right leg buckled and Watson crumpled to the turf. TV replays showed his calf rippling, consistent with an Achilles injury.
He immediately put his hands on his helmet, clearly aware of the severity of an injury similar to the one Jets quarterback Aaron Rodgers sustained last year.
As he was being assisted by the team’s medical staff and backup Dorian Thompson-Robinson grabbed a ball to begin warming up, there was some derisive cheers and boos from the stands in Huntington Bank Field.
Cleveland fans have been split over Watson, who has been accused of being sexually inappropriate with women.
The reaction didn’t sit well with several Watson’s teammates, including star end Myles Garrett, the NFL’s reigning Defensive Player of the Year, who was appalled by the fans’ behavior.
“We should be ashamed of ourselves as Browns and as fans to boo anyone and their downfall. To be season-altering, career-altering injury,” Garrett said. “Man’s not perfect. He doesn’t need to be. None of us are expected to be perfect. Can’t judge him for what he does off the field or on the field because I can’t throw stones for my glass house.
“Ultimately everyone’s human and they’re disappointed just like we are, but we have to be better than that as people. There’s levels to this. At the end of the day, it’s just a game and you don’t boo anybody being injured and you don’t celebrate anyone’s downfall.”
Backup quarterback Jameis Winston also admonished the uncomfortable celebration.
“I am very upset with the reaction to a man that has had the world against him for the past four years, and he put his body and life on the line for this city every single day,” he said. “The way I was raised, I will never pull on a man when he’s down, but I will be the person to lift him up.
“I know you love this game. When I first got here, I knew these were some amazing fans, but Deshaun was treated badly and now he has to overcome another obstacle. So I’m going to support him, I’m going to lift him up and I’m going to be there for him.”
The injury is yet another twist in Watson’s tumultuous time with the Browns.
Cleveland traded three first-round draft picks and five overall to Houston in 2022 to get him, with owners Dee and Jimmy Haslam approving the team giving Watson a fully guaranteed, five-year $230 million contract.
With a solid roster, the Browns were desperate to find a QB who could help them compete against the top AFC teams.
The Browns had moved on from Baker Mayfield despite drafting him No. 1 overall in 2018 and making the playoffs two seasons later.
But Watson has not played up to expectations — fans have been pushing for him to be benched this season — and Cleveland’s move to get him has been labeled an abject failure with the team still on the hook to pay him $46 million in each of the next two seasons.
Watson’s arrival in Cleveland also came amid accusations by more than two dozen women of sexual assault and harassment during massage therapy sessions while he played for the Texans. Two grand juries declined to indict him and he has settled civil lawsuits in all but one of the cases.
Watson was suspended by the NFL for his first 11 games and fined $5 million for violating the league’s personal conduct policy before he took his first snap with the Browns. The long layoff — he sat out the 2021 season in a contract dispute — led to struggles once he got on the field, and Watson made just six starts last season before hurting his shoulder.
Cleveland signed veteran Joe Flacco, who went 4-1 as a starter and led the Browns to the playoffs.
Before Watson got hurt this year, he didn’t play much better. He was one of the league’s lowest-rated passers for a Cleveland team that hasn’t scored 20 points in a game and is back in search of a franchise QB.
