With Statistics Canada announcing that Canada’s inflation rate increased last month, one expert is attributing the rise to food and gas prices, as well as mortgage interest costs.
On Tuesday, Statistics Canada said the country’s annual inflation rate rose to four per cent in August, which is up from 3.3 per cent in July.
Bryan Borzykowski, an independent financial reporter, said this news is not surprising.
“It’s not in the right direction. Four per cent year-over-year is higher than it was the month before, which was 3.3 per cent. In June it was 2.8 per cent,” he said in an interview with CTV Morning Live on Tuesday.
“The Bank of Canada wants that to come down to about two per cent.”
As for why the rate has risen, Borzykowski attributes it to several factors, including high food prices.
According to the latest Consumer Price report, Statistics Canada said that year-over-year grocery prices have slowed, but remain elevated.
“[Prices] are down a little bit from the month before and a bit more from the month before that, but it’s still too high,” Borzykowski said.
He added other reasons for increased inflation rates are the rising price of gas, as well as increasing mortgage interest costs.
“Mortgage interest costs are rising, because interest rates are rising, because the Bank of Canada is increasing rates to try to get inflation down,” he explained.
“So it’s a bit weird when you talk about it that way, but those are probably still the three biggest contributors to [inflation].”
As for what will happen with interest rates, Borzykowski said the reason the Bank of Canada raises interest rates is to cool the demand on the economy. He explained that if gets more expensive to borrow money, or if people are spending more on mortgages, they have less to spend elsewhere, which brings down economic growth.
“I think [the Bank of Canada is] probably not going to raise rates again yet,” he predicts.
“It takes some time for these interest rates to work themselves out through the economy.”
If interest rates do rise, Borzykowski said mortgage renewals will go up as well.
“If they keep rising, you’re going to renew at a higher rate,” he said.
“If you have a variable rate mortgage, you’re going to have to pay a higher rate right away.”
Borzykowski noted that the Bank of Canada is an independent organization that works at arm’s length from the government. He said the Bank of Canada governor is not supposed to be influenced by politicians, but rather make the decisions that are best for the economy.
“Otherwise a politician will say something and they’ll be forced to do it and it could be detrimental to the economy or something else,” he said.
The central bank is set to make its next interest rate decision on Oct. 25.
– With files from CTV’s Rachel Lagace and Natasha O’Neill.
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