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Bank of Canada rate hikes hurt the economy, say 90% of business leaders in survey

Bank of Canada Governor Tiff Macklem waits to appear at the Senate Committee on Banking, Commerce and the Economy, in Ottawa, Wednesday, Nov. 1, 2023. Macklem warns fighting inflation half-heartedly and living with its consequences would be a huge mistake.THE CANADIAN PRESS/Adrian Wyld
Bank of Canada Governor Tiff Macklem waits to appear at the Senate Committee on Banking, Commerce and the Economy, in Ottawa, Wednesday, Nov. 1, 2023. (THE CANADIAN PRESS/Adrian Wyld) (The Canadian Press)

The Bank of Canada’s rate hikes have put the brakes on the nation’s economy, according to 90 per cent of senior business leaders recently surveyed by Chartered Professional Accountants Canada.

The assessment was released the day before the central bank’s rate decision Wednesday morning. Economists expect the bank to hold its key overnight rate at a 22-year high of five per cent.

“Regardless of whether or not we are in a technical recession, the perception among top business leaders is of worsening conditions for the Canadian economy,” Rosemary McGuire, vice-president of research, guidance and support at CPA Canada, stated in a news release on Tuesday.

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CPA Canada says 71 per cent of respondents to its survey reported rates at the current level are having a negative impact on their own company.

The Bank of Canada has held rates steady since a quarter-point hike in July, amid increasing signs the economy is slowing. Last week, a business and consumer sentiment survey by the bank suggested interest rates may be restrictive enough to bring inflation under control, indicating policymakers could consider rate cuts to reduce strain on Canada’s economy.

Canada's Consumer Price Index rose to 3.4 per cent in December, according to Statistics Canada. The central bank's inflation target sits in the middle of a range from one to three per cent.

CPA Canada says 73 per cent of respondents to its survey see inflation hurting their own company, while 61 per cent believe they will continue to feel negative consequences for at least another six months.

“The perception that lingering inflation combined with high interest rates will continue to take a toll both on individual companies and the entire Canadian economy are likely contributing to a negative overall economic outlook,” McGuire added.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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