Quote:
Originally Posted by stampsx2
The feds were handing money out during covid to boost the economy and went into a lot of debt. If they increase interest rates their own interest payments will increase on all the loans they took out. The gdp to debt ratio will increase possibly higher than what we seen in the 90’s.
That together with real estate being one of the last major drivers of gdp in this country (since oil is out),i have a hard time believing the federal government is in any hurry to raise interest rates.
I don’t think the feds can afford higher interest rates or a cooling housing market at this point.
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Obviously the government went into a lot of debt and there’s no debate in that fact. But I think calling oil over is a bit premature. Will we eventually get past oil? Probably. But certainly at this point we’re not close. The provincial government can actually balance the budget this year, based solely on energy and not because they’ve been amazing fiscal stewards.
Perhaps most notably though, the BoC is separate from the government. They make decisions apart from the government of the day, and while raising rates isn’t helpful for the government, they don’t have control over that aspect directly. It’s also a longer term issue for the government as most of the debt is locked in, in the form of bonds. So, once those bonds mature and have to be re-upped it’s an issue, but not immediately. I’m not suggesting this is great; just that it’s how these things work from a mechanical perspective. I haven’t looked at what’s maturing this year or in the next year or two, but my guess is most of the debt that they took on is pushed out further than a year or two.