More than half of Canada are on the verge of bankruptcy and unable to pay their debts! Pessimistic about interest rate cuts: "The economy is over, and interest rate cuts are useless!" ”
On Wednesday, the Bank of Canada announced that it would cut its benchmark interest rate to 4.5%, while the central bank's governor said,
As we all know, Canada's interest rate has been maintained at 5% since July last year (2023), and after inflation slowed in June, the central bank lowered interest rates to 4.75% for the first time, and today is the second time.
Source: CTV
The Bank of Canada's policy interest rate, which broadly affects the cost of borrowing across the country. With inflation continuing to cool and Canada's economy showing signs of weakness, economists widely expect the move.
Canada central bank governor ·Tiff Macklem said on Wednesday that inflation is expected to continue to slow in the future, although the central bank expects economic growth to pick up in the second half of the year.
He told reporters after the announcement: "We are increasingly confident that the factors to bring inflation back to target are in place. ”
McLeum reiterated on Wednesday that future interest rate decisions will depend on the latest economic data and how the central bank's board of governors expects this to affect the inflation outlook.
"If inflation continues to moderate broadly as we forecast, it is reasonable to expect further cuts in our policy rate," he said. ”
McClaim on Wednesday responded to questions from some reporters about more clarity on whether the central bank will cut rates in each of its remaining three decisions. He reiterated that the central bank will make interest rate decisions again and again, given that there is still a risk that it could push inflation higher.
"The expected direction of our policy rate is to the downside, but we don't have a preset path," he told reporters. ”
Source: CTV
Avery ·Shenfeld, chief economist at Canada Imperial Bank of Commerce, said in a memo to clients Wednesday morning that Canada central bank's message suggests there is more room for rate cuts in upcoming decisions.
"This leaves the door open for further rate cuts in September," he said. ”
Canada Imperial Bank of Commerce expects a fourth consecutive rate cut in October to bring the policy rate down to 4.0%.
Canada Dou·g Porter, chief economist at Bank of Montreal, said in a memo on Wednesday that he also expects two more rate cuts in the remaining three decisions this year. Whether the central bank continues to cut interest rates or pauses in September depends on how well inflation data performs, as well as any signs of weakness in the labor market.
"The tone of much of today's rhetoric almost seems to suggest that central banks need to be persuaded not to continue cutting interest rates now," he said. ”
According to Reuters, money markets are expecting another 25 basis points of cuts this year, with a 53% chance that the central bank will cut rates again in its next monetary policy decision on September 4.
Source: RCI
Nan·cy Snedden, president of BDO Debt Solutions, said: "Even if central banks cut interest rates, Canada seem to have reached a point where more than half of the population is unable to pay their debts. ”
A survey conducted jointly by BDO and CPA Canada found that 52% of Canada do not believe that future rate cuts will ease their financial situation. In addition, the results of a poll conducted by MNP Ltd., a commercial company in charge of dealing with insolvency, on this issue were higher, at 56%.
Two-thirds of respondents said they urgently needed a central bank to lower interest rates. More than half said they were concerned that interest rates might not fall fast enough to provide the financial relief they need.
Canada's latest MNP Consumer Debt Index shows that more than half (52%) of Canada say they have been unable to pay their bills, $200 or less.
The report notes that the main reasons Canada are unable to meet their financial obligations are rising interest rates and the high cost of living. "Rising household bills and food prices have exacerbated financial anxiety among Canada, while the increased cost of debt servicing has been further exacerbated for those in debt," MNP president Grant · Bazn said in a statement. "Among those surveyed, 35 percent said their income was no longer enough to pay bills and debt, the highest percentage recorded since the report began publishing five years ago.
"There are people who live on a paycheck and struggle to make ends meet and meet the basic necessities. Others are in debt, and their financial problems cannot be solved, regardless of interest rates. Grant Bazian, President of MNP, said.
What's next for inflation?
The Bank of Canada's second rate cut in two months will immediately affect Canadaians with variable rate debt, including some mortgages and home equity lines of credit.
Before the interest rate decision was made, many Canada were calling for relief, according to recent polls. The MNP Personal Debt Index, released this week, showed that 66% of respondents "urgently" needed another rate cut to reduce the cost of debt.
Macleum acknowledged the plight families are facing and said the downward path in interest rates would bring some relief to Canada.
"It's not a huge change, but it means that the cost of debt is coming down," he said on Wednesday. Canada will have more income to spend on other things. ”
While much of the Bank of Canada's messaging in its ongoing fight to curb inflation has focused on factors that could reignite inflationary pressures, Wednesday's communication included a notable shift to place greater emphasis on downside risks.
Some netizens said that now the economy is miserable, whether it is to raise interest rates or cut interest rates, it seems very weak, the unemployment rate is very high, and many data are not credible.