With inflation at a record high since the 1980s, the Bank of Canada has raised the interest rate to 2.5 per cent, the highest it’s been since 1998.

Assistant Professor of Continuing Adjunct Policy Studies at Queen's University Eugene Lang says we can expect to see continual incremental interest rate increases as the Bank of Canada tries to cool an overheated economy.

“We’re starting from a interest rates at a very low and stimulative rate…the bank is moving them up to what they regard as a neutral rate where they will neither stimulate or contract the economy…There’s a bit of a guessing game of what it’s really going to take to bring that inflation level of around eight per cent down to their target rate of two per cent. They forecast that next year 2023, they think they can get it to four per cent and by 2024, they hope to get it down to two per cent,” says Lang.

Lang says we are seeing the effects of the interest rate hikes in the housing market.

“Those that own homes that are on variable rate mortgages are seeing their mortgage rates going up immediately, and those that are on fixed term mortgages are going to be paying a lot more. It’s good that it’s taken some demand out of the housing market but for those that own mortgages it’s a different story,” says Lang.

According to Lang, this is an unprecedented set of circumstances.

“Right now we have historically low unemployment and relatively high inflation, back in the early 80’s the unemployment rate was at 12 or 13 per cent, as the inflation rate was...In 1981-82 interest rates reached 19 to 20, a lot of people lost their houses as an attempt to bring inflation down, we’re not going to get anywhere near that.”

Listen to the full CFRC interview with Professor Lang below: