A recent move to boost Canada’s interest rate doesn’t come at a good time for some in Saskatchewan.
The province currently has the second highest consumer debt rate in the country. On Wednesday, the central bank hiked its rate by one-quarter point to 1.0 per cent, its second 25-basis-point increase since July.
“This 25-basis point move is going to hurt some people. And some people are really going to feel that. And some businesses are going to feel that for sure,” said Jason Childs, associate professor of economics at the University of Regina.
“It’s not going to be good news for most in Saskatchewan because the economy is still relatively soft. It’s looking better, but not great.”
Childs said this could be the breaking point for some Saskatchewan businesses that have been carrying a lot of debt.
“Those businesses that have been surviving on credit and just trying to keep the ball in the air until prices pick back up, or activity picks back up, this may put some of those businesses over that mark, where they say, ‘No, I’m done,'” Childs said.
On average, consumer debt in Saskatchewan is around $25,000. That includes credit card debt and line of credit.
The average mortgage debt in Saskatoon is around $176,000. That compares with $143,000 in Regina.
“Those are substantial numbers,” Childs added.
Tack on other financial pressures, such as an increase in the provincial sales tax with the last budget and a Saskatchewan economy Childs describes as “soft,” some are starting to feel the strain on their pocket book.
“It’s yet another straw on camel’s back, if you will,” he said.
The rate hike Wednesday likely also came as a bit of a surprise for some experts.
Many had been expecting Bank of Canada Governor Stephen Poloz to wait until October before introducing the second increase.
Following a quiet August for bank officials, some believed the bank would hold off because hadn’t clearly telegraphed a September hike.
Others predicted the bank would refrain from moving the rate out of concern such a move would drive up an already strengthening Canadian dollar and pose a risk to exporters.
In its statement, the bank also said headline and core inflation have seen slight increases since July, largely as expected.
It noted, however, that upward pressure on wages and prices remain more subdued than historical trends would suggest, which has also been seen in other advanced economies.
– With files from 650 CKOM’s Chris Carr and The Canadian Press.