As much as we may dislike it, there are three clear arguments for hiking rates:
- The housing market is heating up again – the average house price in Toronto is now rising $35,000 a month (!). Affordability and housing debt is one of the main concerns for the Bank and policymakers.
- The US raised rates in May to 5.25%, and there’s only so much we can deviate without harming the purchasing power of the CAD.
- Inflation is not under control. The Bank press release notes that the price of goods is rising, even while the cost of gas is down. You can see in the chart below that demand for services and ”semi-durable” goods (clothes, jewelery, shoes) are still way up; it’s only ”non-durable” like energy that are down, largely due to global factors.