October 23, 2024
While inflation in Canada has cooled to 1.6 per cent in September, high grocery and rental costs continue to strain the budgets of many Canadians, according to a new survey by the Angus Reid Institute. Despite four consecutive interest rate cuts by the Bank of Canada, aimed at stabilizing inflation, lower-income Canadians, in particular, are still feeling the pressure of soaring expenses.
Interest Rate Drops, but Relief Is Delayed
On October 23, 2024, the Bank of Canada made a sizable cut to its key lending rate, lowering it from 4.25 per cent to 3.75 per cent. This marks the fourth rate cut in a row, following the steady decline in inflation from 2.7 per cent in June to 1.6 per cent in September. “We took a bigger step today because inflation is now back to the 2 per cent target, and we want to keep it close to the target,” said Governor of the Bank of Canada, Tiff Macklem, in a statement.
While these rate cuts are intended to maintain stable inflation, many Canadians have yet to feel the relief, particularly when it comes to daily essentials like groceries and rent.
Persistent Struggles with Groceries
The survey found that 51 per cent of Canadians are struggling to keep up with their household food needs, a trend that has remained consistent since late 2021. The burden is felt even more acutely by those with annual household incomes below $50,000, where two-thirds (65 per cent) report difficulties in affording groceries. Although inflation has generally eased, the cost of essential items like food remains high, disproportionately affecting lower-income households.
Renters Feeling the Squeeze
Rental costs have risen across Canada by nearly nine per cent year-over-year, compounding financial difficulties for many. Despite some regions, such as Ontario and British Columbia, seeing a slight dip in rent prices, the overall situation remains bleak for renters. Three-in-five respondents said their monthly rent is “tough or very difficult to keep up with.” The high cost of rent has led to growing pessimism about homeownership, with 30 per cent of renters expressing a desire to buy a home but being unable to afford it, and 41 per cent having given up hope altogether.
Homeownership Remains Elusive for Many
For prospective homeowners, the survey paints a mixed picture. While some Canadians, particularly those who already own multiple properties, are encouraged by the recent drop in interest rates, many continue to face significant barriers to entering the housing market. Even with falling rates, three-in-ten renters said that purchasing a home remains out of reach. Those who are looking to buy are often those who are already in better financial positions, highlighting the growing divide between property owners and renters.
A Glimmer of Hope?
There is, however, a silver lining. The proportion of Canadians who say they are worse off financially than a year ago has dropped by seven percentage points, and the number who expect their situation to worsen in the next 12 months has also decreased. While financial struggles persist for many, especially when it comes to food and rent, these findings suggest that some Canadians are beginning to feel more optimistic about their financial future.
As Canada continues to grapple with the long-term effects of inflation, the challenge remains to ensure that the most vulnerable populations are not left behind, particularly when it comes to the essential costs of food and housing. For many, relief is still lagging behind the positive macroeconomic indicators, leaving them waiting for tangible improvements in their day-to-day lives.
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