As inflation accelerated sharply in 2022, the purchasing power of personal households fell. Meanwhile, the Bank of Canada quickly raised its key rate of interest from pandemic-era lows to five% by mid-2023 before pausing.
The consumer price index reached an all-time high of 8.1% in June 2022 and has since slowed under the load of the Bank of Canada’s rate hikes.
While higher rates of interest weighed on many households as the associated fee of their mortgage payments rose, additionally they helped boost investment income, the report said.
The wealthiest 20% of households’ investment income grew faster than their interest payments, leading to a net increase in income over inflation and a rise of their purchasing power in 2023.
For other households, interest payment increases last yr were, on average, higher than their investment income.
As a result, the purchasing power of households within the third and fourth quintiles stagnated, while the purchasing power of the lowest-income households deteriorated.
“In summary, the purchasing power of most households remained higher in the first quarter of 2024 than in the last quarter of 2019,” the report said.
“However, since 2022, rising inflation and more restrictive monetary policy have led to a loss of purchasing power, particularly among lower-income households.”
