There’s been a lot of talk about tariffs driving up prices in Canada and causing inflation. But will this lead to higher interest rates?
The Bank of Canada (BOC) typically raises rates to fight inflation, but not all inflation is the same. There are two types:
Demand-Side Inflation – Happens when people have extra money and spend more, like during COVID when government support boosted demand. The BOC raises rates to cool things down.
Supply-Side Inflation – This occurs when costs rise due to external factors (like tariffs), making goods more expensive. In this case, higher interest rates don’t help much—instead, if tariffs slow the economy, the BOC may actually lower rates to stimulate growth.
Bottom Line: If tariffs cause inflation but hurt businesses and jobs, we could see rate cuts instead of hikes.
If you’re wondering how this could impact your mortgage, let’s chat!
