The Bank of Canada has offered only the slightest hint about what it plans to do next.  In the statement that accompanied last week’s 50 basis-point increase in the Policy Rate the Bank said it “will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target.”

That is a softening of the language on pending rate hikes that was used in previous statements, but it gives the Bank some wiggle room to continue with increases or stand pat and wait to see what the economic data shows.

At the same time the Bank wanted to be clear that it has not lost sight of its goal of taming inflation.

“We are resolute in our commitment to achieving the 2% inflation target and restoring price stability for Canadians,” the Bank said.

That tone was reinforced by the Bank’s Deputy Governor Sharon Kozicki, in a speech one day after the rate announcement.

“If we are surprised on the upside, we are still prepared to be forceful.”

“But we recognize that we have raised interest rates rapidly and that their effects are working their way through the economy,” Kozicki said.

Inflation is running at nearly 7% in Canada and there are early signs it is moderating.  The Bank’s trend-setting overnight rate is now at 4.25%.  The next rate announcement is set for January 25, 2023.

Published by First National Financial LP

With inflation running at generational highs and interest rates on the rise many debt-strapped Canadians are struggling to reorganize their finances.

A recent survey sponsored by FP Canada (an organization that represents and promotes professional financial planners) suggests “unconscious spending” can be an obstacle to a sound, workable household budget.

Unconscious spending involves purchases that are made out of convenience or habit rather than with a view to budgets and long-term financial plans.  The use of credit cards is a central part of the issue.

The online poll indicates 28% of Canadians are using their credit cards more frequently.  Depending on their payment habits, credit card interest can be a significant expense.  It also shows 21% have increased their use of credit cards to pay for subscription services such as video streaming or cellphones.  Many also use credit cards to pay utility bills like electricity and gas.  This practice often means consumers aren’t aware of price increases, or new or extra charges.

Other forms of unconscious spending include:

• Buying more than intended in order to take advantage of a perk, like free shipping
• Buying more than intended because it is “on sale”
• Greater use of buy now, pay later schemes

Advice for curbing unconscious spending:

• Develop a budget, stick to it and review it regularly
• Use good, old fashion cash to make purchases
• Limit the use of credit cards for on-going, routine payments

Published by First National Financial LP