Inflation and rate hikes will hurt the poorest, Royal says

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Inflation and rising borrowing costs will affect all Canadian households, but low-income Canadians are the hardest to hit, warns a new study from RBC Economics.

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According to Royal Bank economists, a return of the overnight rate to 2.0% will increase the average amount of debt payments by Canadian households by nearly $ 2,000, or 15%, next year.

They calculate, however, that the debt service ratio of low -income Canadians will increase twice as fast as high -income households by the end of 2023.

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When it comes to inflation, economists believe that low -income Canadians will also be hit harder, as they spend a larger portion of their income on consumer purchases.

Economists have also noticed that low -income households have a smaller financial cushion to deal with rising prices and borrowing costs.

The Bank of Canada raised its core interest rate by half a percentage point in April, to 1.0%. The central bank has warned of further rate hikes this year as it tries to curb annual inflation, which in March hit a new three -decade high of 6.7%.

Source: Radio-Canada

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