The COVID-19 pandemic sparked a lot of economic changes.
At the outset of the pandemic, Canada’s federal government injected significant money into the economy to support people who lost their jobs or had to temporarily close their businesses. Provinces and municipalities also followed suit with their own targeted programs.
Now, the country is looking to recover, but faces historic levels of inflation. To combat this, the Bank of Canada is raising interest rates.
While raising rates may be necessary to curb inflation, it can also cause challenges and issues for business owners. Here’s what you need to know.
Why are interest rates increasing?
When the government injected cash into the economy during the pandemic in the form of corporate supports, community aids, and direct payments, it increased the money supply. The Bank of Canada also decreased interest rates to around zero per cent, which incentivized people to take on more debt and increase their spending.