Canada’s headline inflation rate – the Consumer Price Index – is currently running at just below 5%. That is the highest level in nearly 20 years. The most recent numbers out of the U.S. put the rate there at 7% which is a 40 year high.
A Nanos poll taken for Bloomberg News late last month suggests a majority of Canadians would prefer to see the Bank of Canada increase interest rates, in an effort to rein-in rising costs, rather than let inflation get any higher.
The poll found 87% of those surveyed are more concerned about the pace of rising prices that they are about higher interest rates. Ten percent are more concerned about higher borrowing costs.
Given the level of Canadian household debt the results might seem counter-intuitive. Fifty-one percent of respondents say they will likely face, at least, some negative impact from higher interest rates.
This might be explained by a generational divide that showed up in the poll.
“Younger Canadians are much more likely to report a negative sensitivity to higher interest rates compared to middle-aged and older individuals,” says Nik Nanos, founder of the Nanos Research Group.
Analysts point out, though, that interest rate increases may cool spending and reduce the demand for debt, such as mortgages, but they will not resolve key inflation drivers like constrained production and supply chain slowdowns.