HSBC is predicting two interest rate increases by the Bank of Canada in 2017.
The first is widely expected to happen on Wednesday. HSBC predicts the second will take place in October.
If HSBC is proven correct in their prediction, the consequences for the Canadian economy could be serious.
As I reported yesterday, a study by MNP shows that “Over seventy percent of Canadians rate their ability to cope with a [one per cent] interest rate increase as less than optimal.”
Additionally, “The vast majority of Canadians (77 per cent) would have difficulty absorbing an additional $130 per month in interest payments on debt.”
Even worse, 27% say they are already “in over their heads” on mortgage payments, and two interest rate hikes could cause substantial damage.
HSBC predicts rates will increase from .50% to .75% in June, and from .75% to 1% in October. While this would not be the full 1% increase mentioned above, it could nevertheless put millions of Canadians into further financial difficulty – which demonstrates how fragile our economy has become.
No margin for error
With debt now the main driver of growth in our economy – and many other economies around the world – we are seeing that people have almost no financial margin for error. The “solution” to the 2008 financial crisis only pushed the day of reckoning further down the road. Our “leaders” and “experts” managed to “save” a system made weak by excessive debt by adding even more debt to the system. Now, central banks are trying to figure out how why super low interest rates aren’t leading to increased growth, and they flail around in ignorance hoping their next move will somehow “fix everything,” instead of addressing the deep underlying sickness in our economy and broader economic system.
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