For years now, central banks around the world have helped consumers and businesses weather economic storms. In crisis after crisis, they cut interest rates to help people get through. They printed money and bought bonds to prop up markets.
This time, those same banks are actively making life more difficult.
“I’m sure some of this does feel a bit counterintuitive,” Bank of Canada governor Tiff Macklem said.
The Bank of Canada has raised interest rates six times since March. Rates have shot up from 0.25 per cent to 3.75 per cent. And the bank has warned it’s not done yet.
“We do think we still need to raise rates a little bit further,” Macklem told CBC News in an interview this week. “How far, we will see.”
In a wide-ranging interview, Bank of Canada governor Tiff Macklem tells CBC’s Peter Armstrong that Canadians should expect more interest rate hikes, and a mild recession is possible, as the central bank continues its fight against inflation.
The bank is raising rates now to rein in inflation that has reached its highest level in decades. Increasing rates is expected to slow the economy. So, Canadians who are already struggling to keep up with the rising cost of living are now facing higher borrowing costs. And those higher borrowing costs will drive down the economy.
“We actually think growth is going to be close to zero for the next few quarters, until about the middle of next year,” Macklem said.
He says that slowdown in economic activity should be short and not very deep. But it will have an impact.
“[The] unemployment rate is going to go up. We’re not talking about high unemployment rates that we’ve seen in past recessions, but it is going to go up,” he said.
‘People are frustrated’
Macklem says he understands how Canadians are feeling.
“People are frustrated. They feel helpless,” he said.
Canadian consumers aren’t the only ones who are frustrated. Economist Jim Stanford from the Canadian Centre for Policy Alternatives says the central bank has pushed rates too high, too quickly. Central banks around the world are looking at the current state of inflation, he said, and assuming both the cause and the solution are the same as the last inflation crisis in the 1970s and ’80s.
“Policy-makers at the Bank of Canada and the government and academia, I think, are unduly obsessed with what happened in the 1970s. It’s like a nightmare,” Stanford said in an interview with CBC News.
In the 1970s, real wages were rising along with prices. This time, real wages have fallen. In the 1970s, corporate profits were falling. Right now, corporate profits have surged to record levels.
“So this is the exact opposite of what we experienced in the 1970s. And pulling out a 50-year-old recipe and applying it again to today’s situation is absolutely inappropriate,” Stanford said.
He says the central bank should pause its relentless rate hikes and see if inflation really does need more of a push.
Headline inflation has slowed. Supply-chain issues are beginning to unwind. Global commodity costs have begun to fall.
New numbers won’t slow rate hikes: economist
The latest inflation numbers will be released on Nov. 16.
But RBC economist Claire Fan says this latest batch of numbers won’t do much to slow rate hikes.
“Consumer price growth in Canada likely ticked higher in October. We expect the annual rate to have risen to seven per cent, up from 6.9 per cent in September but still down from the 8.1 per cent recent peak in June,” Fan said in a note to clients.
She says a resurgence in gas and fuel oil prices was driving the increase, which should give the Bank of Canada enough reason to keep pushing rates higher.
How has inflation and the high cost of living impacted you? Tell us your story in an email to ask@cbc.ca or join us live in the comments below.
A rebound in the price of gasoline likely drove inflation higher again in October. (Joseph Prezioso/AFP/Getty Images)
“While there are signs that inflation is past its peak in Canada, it will likely take a sustained period of higher interest rates and a weaker economy for price growth to ease fully back to central bank target rates,” she wrote.
The RBC forecast assumes the bank will hike the rate by another 25 basis points in early December and then pause to assess the impact all of those rate hikes have had on the economy.
But it means anyone with a variable rate mortgage or a home equity line of credit is looking at yet another boost to their monthly payments.
‘We are getting closer’
Macklem says he knows these rate hikes are making life harder for many Canadians.
“We don’t want to make this more difficult than it has to be,” he said. “But at the same time, if we don’t do enough, if we’re half-hearted, Canadians are going to have to continue to endure the high inflation that is harming them every day.”
And that’s the risk here, analysts say. If the bank pauses too soon and finds inflation is still rising, it will have to take even more aggressive measures down the road. If it overshoots and keeps hiking once inflation is coming down in a sustainable way, then Canadians will needlessly suffer.
Macklem, left, speaks with CBC’s Peter Armstrong in Toronto on Thursday. (Evan Mitsui/CBC)
The window to get this right is getting smaller and smaller.
“We do think that there is a need for further increases, but we are getting closer to the end of this tightening cycle. I can’t tell you exactly what that is,” Macklem said.
“We’re not there yet. But we are getting closer.”
The good news is that Macklem believes we should be in a much better place by the middle of next year. The bad news is that the middle of next year is a long way off for anyone struggling to put food on their table or pay their mortgage payment today.
PORT-AU-PRINCE, Haiti (AP) — Gangs attacked in several neighborhoods of the Haitian capital of Port-au-Prince on Saturday, forcing many people to leave their homes after gunfire raged through the night. Authorities did not immediately release casualty information.
Haiti’s police union said on its social media channels that the ongoing attacks in the neighborhood of Solino could mean losing control of the entire city to gang violence.
“If there’s no measures against the criminals who are taking control in Solino and Nazon, we will lose the entire capital,” Haiti’s police union said on social media platform X. “No government will be in its place if we cannot reduce such insecurity.”
On Thursday, at least one woman was killed as gangs opened fire in Solino, St. Michel, Tabarre 27 and other neighborhoods.
Radio Télé Métronome reported that the swearing in of Haiti’s provisional electoral council scheduled for Friday in downtown Port-au-Prince was moved to a safer area.
Six officials from the Bahamas arrived in Haiti Friday to join a U.N.-backed mission led by Kenyan police to help quell gang violence. The officials are the first of a contingent of 150 soldiers from the Bahamas expected in upcoming months.
It wasn’t clear what prompted the latest attack, which comes just days after Haitian and Kenyan police launched an operation that killed at least 20 suspected gang members in an area controlled by the 400 Mawozo gang that operates mainly in Tabarre.
KYIV, Ukraine (AP) — A video purporting to show dozens of North Korean recruits lining up to collect Russian military fatigues and gear aims to intimidate Ukrainian forces and marks a new chapter in the 2 1/2-year war with the introduction of another country into the battlefield, Ukrainian officials said.
The video, which was obtained by Ukraine’s Center for Strategic Communications and Information Security, which operates under the Culture and Information Ministry, is said to show North Korean soldiers standing in line to pick up bags, clothes and other apparel from Russian servicemen. The Associated Press could not verify the video independently.
“We received this video from our own sources. We cannot provide additional verification from the sources who provided it to us due to security concerns,” said Ihor Solovey, head of the center.
“The video clearly shows North Korean citizens being given Russian uniforms under the direction of the Russian military,” he said. “For Ukraine, this video is important because it is the first video evidence that shows North Korea participating in the war on the side of Russia. Now not only with weapons and shells but also with personnel.”
The center claims the footage was shot by a Russian soldier in recent days. The location is unknown.
It comes after the head of Ukrainian military intelligence, Kyrylo Budanov, said in local media reports that about 11,000 North Korean infantrymen were currently training in eastern Russia. He predicted they would be ready to join fighting by November. At least 2,600 would be sent to Russia’s Kursk region, where Ukraine launched an incursion in August, he was quoted as saying.
“The emergence of any number of new soldiers is a problem because we will simply need new, additional weapons to destroy them all,” Solovey told AP. “The dissemination of this video is important as a signal to the world community that with two countries officially at war against Ukraine, we will need more support to repel this aggression.”
The presence of North Korean soldiers in Ukraine, if true, would be another proof of intensified military ties between Russian President Vladimir Putin and North Korean leader Kim Jong Un. Last summer, they signed a strategic partnership treaty that commits both countries to provide military assistance. North Korean weapons have already been used in the Ukraine war.
TORONTO – Two suspects have been arrested in connection to a weekend shooting that targeted a Jewish school in the city’s north end, Toronto police said Friday, as investigators look to establish the motive for the attack.
Deputy Chief Robert Johnson said a 20-year-old man and a 17-year-old boy were arrested on Thursday in the case.
He said the two are facing multiple charges, including the possession of an unauthorized loaded firearm and the discharge of a restricted firearm.
Police allege the two shot at Bais Chaya Mushka girls’ school on Oct. 12.
“Fortunately, no one was inside and there were no injuries,” said Johnson. A school window was shattered, he said.
Bais Chaya Mushka was the target of another attack in May, and Johnson said investigators are working to find out if the two shootings are linked.
“This is the second incident at the school and it occurred on Yom Kippur, a sacred day for the Jewish community, making this even more devastating,” he told reporters.
He said the force’s gun and gang task force led the investigation with the assistance of the hate crime unit, the Centre of Forensic Sciences and the Ministry of the Solicitor General.
“Their meticulous examination of the evidence was key in identifying and charging the two individuals,” he said.
Johnson said police are investigating to determine if the shooting was motivated by hate, but could not confirm a motive as of Friday.
“While we’re not sure right now what the motivation is, I can assure you that if we find evidence … that this is motivated by hate, we will explore the aggravating nature of this with our partners in the ministry through the court process,” he added.
Johnson said the safety of the city’s Jewish community remains a top priority for Toronto police, and the force will have a strong presence in Jewish neighborhoods for as long as needed.
“Our increased police presence will continue as long as is necessary,” he said.
This report by The Canadian Press was first published Oct. 18, 2024.
