The greatest hits in personal finance – or rather, to personal finance – this year were like punches to the face. Why linger over a year of blows? The reason is that we’re heading into a year of even greater uncertainty for household finances, including a possible recession. Understanding where we’ve come from will help you prepare for what’s ahead in 2023. Here are the highlights:
Jan. 26: With inflation on the rise, the Bank of Canada has its first opportunity of the year to raise interest rates. We’ll pass, said the central bank. Later in the year, when rates roared higher, some economists wondered why the bank waited so long to attack inflation. Expect more questioning of the bank if rate hikes continue in 2023.
Feb. 16: Inflation gets serious as Statistics Canada reports that the cost of living jumped 5.1 per cent in January, double the average rate for the previous 40 years. As 2022 comes to a close, we’re still well above that level.
Feb. 24: Russia invades Ukraine. A human tragedy with economic repercussions that fed inflation by sending energy and grain prices higher. February was also the month when the average resale house price in Canada hit a peak of $816,720. The November average price: $632,802, a drop of 22.5 per cent from February. Expect more price declines next year.
March 2: The Bank of Canada gets serious about inflation, kind of. The trendsetting overnight rate goes up by a tepid 0.25 of a percentage point in the first of what will turn out to be seven rate hikes.
Mid-June: The average price of gas across Canada hits a high for the year around $2.10 a litre. Prices eased from there, but stayed well above year-earlier levels for much of 2022. Soaring gas prices increase demand for EVs, so of course there was a shortage of these vehicles. Order yours now for 2024 delivery?
July 8: We’re all reminded of how important the internet and cellphones are for personal finance, among other things, when the Rogers Communications network goes down. If you haven’t tossed some cash into the back of a drawer as a precaution against future outages, get on that.
July 13: The Bank of Canada’s overnight rate goes up by a full percentage point, a shocker that suggests a much higher level of concern about inflation than was evident earlier in the year. In a flash, people with variable-rate mortgages, lines of credit and floating rate loans have their borrowing costs increased significantly.
July 20: Statistics Canada reports an 8.1 per cent inflation rate for June, adding some context for the big rate hike earlier in the month. The push and pull of high inflation and soaring rates leads Royal Bank of Canada to stick its neck out and predict a recession in 2023. Short and mild, but still a recession.
Oct. 5: News breaks that businesses have gained the option to add a surcharge to the bill for clients paying for goods and services by credit card. The economics of collecting credit card reward points are in question if surcharging is widely adopted.
Mid-October: The Canadian bond market’s year from hell reaches a crescendo, with the benchmark FTSE Canada Universe Bond Index down close to 15 per cent. Also, the S&P/TSX Composite Index hits a low for 2022 with a year-to-date decline of about 12 per cent. Double-digit losses for stocks and bonds in the same year? You might not see that again in your lifetime.
Oct. 17: Supermarket chain Loblaw Cos. Ltd. announces a price freeze on its No Name lineup of in-house products until the end of January. In one bold move, all the inflation that boosted food prices in the previous 12 months gets locked in at the peak of freshness. Next question: How much do prices go up in February?
Dec. 7: The final interest rate increase of the year by the Bank of Canada. Will it be the final rate hike before the bank stands down in its fight to cool inflation? Stand by for Jan. 25, the first rate-setting date in 2023.
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