Bank of Canada Weighs Rate Hikes Against Mounting Household Strain
The Bank of Canada, led by Governor Tiff Macklem, must decide whether to hold its policy rate at 2.25 per cent or begin a series of increases this Wednesday as inflation hit 3.1 per cent in September. The decision comes amid record consumer debt, rising mortgage delinquencies, and growing food bank usage across the country.
The Bank of Canada’s governing council, led by Governor Tiff Macklem, faces a pivotal decision this Wednesday: maintain the current policy rate at 2.25 per cent or launch a possible series of interest rate increases. 
Inflation driven by energy prices reached 3.1 per cent in September, moving further above the central bank’s 2 per cent target. Policymakers are assessing whether inflation will revert to that target within six to twelve months.
Higher interest rates would increase costs for variable-rate mortgages and home equity lines of credit, while qualifying for new mortgages from chartered banks would become harder. Increased rates are also likely to push down home prices, and home builders may shelve projects indefinitely as borrowing costs rise. Business investment costs would climb, though the ability to pass those costs to customers is limited by reduced aggregate demand.
These potential rate hikes coincide with significant economic strain on Canadians. A TransUnion report indicates Canadian consumer debt has reached a record $2.64 trillion. Consumer disposable income is already reduced because more income must be devoted to servicing high levels of debt, and living standards for many Canadians may decline further as more income is directed to interest payments.
Mortgage delinquencies are increasing in Ontario, Prince Edward Island, and British Columbia. An Ontario consumer insolvency firm reports the highest number of homeowner bankruptcies since 2016.
The labour market is also under pressure. National unemployment remains at 6.5 per cent. According to Statistics Canada, Canada lost 68,000 jobs in September, following a loss of 42,000 jobs in the previous month. 
Food bank usage in Canada has more than doubled since 2019. According to Food Banks Canada, there are now 2.35 million food bank visits per month, and almost 20 per cent of people using food banks have jobs.
Prime Minister Mark Carney has characterized the current economic situation as a trade war, adding another layer of complexity as the central bank balances the goal of battling inflation against the need to support households.