It is nearly impossible to find someone in the financial world who disputes the suggestion that the Bank of Canada will raise interest rates by half a point this week.
This comes on the heels of a one-quarter point hike a few weeks back and is, by many accounts, the forerunner to a string of increases that will take rates up by two percent by year’s end.
Young people may want to ask their grandparents how all of this works. Hikes of this magnitude and frequency were usual fare 30 or 40 years ago but not something the current generation has had to deal with. Back then central bankers were wrestling inflation to the ground with higher interest rates to discourage purchasing on credit which, in turn, lowers demand and tames prices.
A former senior economist with the Bank of Canada, Peter Andersen, who studies this stuff for the CEO development organization, TEC Canada, says the higher rates will discourage homebuying by this fall meaning reductions of unsustainable prices in centres like Toronto.
