In a move that surprised some analysts, the Bank of Canada has raised the benchmark interest rate to 1%.
In a statement, the bank said “Recent economic data have been stronger than expected, supporting the bank’s view that growth in Canada is becoming more broadly-based and self-sustaining.”
However, the bank also noted concerns over high consumer debt levels.
“Given elevated household indebtedness, close attention will be paid to the sensitivity of the economy to higher interest rates.”
Economic growth is expected to slow as the year goes on.
The bank pointed out that core inflation increased as they expected, but wages have not increased as much as they have in the past under similar conditions.
This is part of a pattern I’ve repeatedly noted, with wage growth often falling behind the increase in inflation. We have seen this throughout much of the western world, particularly as the “free trade” mantra has been pushed from the elites. Even in periods of temporary “growth,” most people aren’t actually getting further ahead, and it seems that pattern is continuing.
Additionally, growth based upon record-high levels of household debt is inherently fragile, and speaks to the fact that millions of Canadians have looked towards debt in order to maintain a good standard of living – a clear sign of serious underlying problems in the national economy.