Freeland warns of 'difficult days ahead' as Canada's economy shows sign of weakness

Finance Minister Chrystia Freeland issued a warning to Canadians Wednesday — the coming months won't be pretty as rising interest rates slow a once red-hot economy and force some people out of their jobs.

The Bank of Canada's recent rate hikes to tame sky-high inflation will increase borrowing costs for businesses and consumers alike, which will send shockwaves throughout the economy, Freeland said.

Speaking at an auto industry conference in Windsor, Ont., Freeland said she would be honest with Canadians about the roadblocks that lie ahead and the threat of higher unemployment and mortgage rates — developments that could hurt many households.

"Our economy will slow. There will be people whose mortgage rates will rise. Businesses will no longer be booming. Our unemployment rate will no longer be at its record low. That's going to be the case in Canada. That will be the case in the U.S. and that will be the case in economies big and small around the world," Freeland said.

"There are still some difficult days ahead for Canada's economy. To say otherwise would be misleading."

The Bank of Canada — like other central banks, including the U.S. Federal Reserve — has been aggressively raising rates this year to establish price stability and achieve its 2 per cent inflation target.

There's a long way to go. Statistics Canada reported Wednesday that the Consumer Price Index (CPI) rose 6.9 per cent on a year-over-year basis in September — marginally lower than the 7 per cent increase reported the month before.

With inflation so sticky, economists are expecting more rate hikes to reduce demand and cool the economy. That could prompt a recession sometime in 2023.

While inflation has slowed somewhat in recent months as energy prices have stabilized, Freeland said the government will not be able to help everyone ride the inflationary wave.

"We cannot compensate every single Canadian for all of the costs of inflation driven by a global pandemic and Putin's invasion of Ukraine," Freeland said.

But she promised relief for the poorest Canadians who are most vulnerable to sudden spikes in the cost of food and rent.

Freeland pointed to the passage of Bill C-30, government legislation to temporarily double the GST credit paid to low-income households.

Government estimates say this bill will give eligible people without children an extra $234 this year, while couples with two children will receive an extra $467 to offset rising costs.

Another bill before the House of Commons, C-31, would provide rent relief and send cheques to parents to cover the cost of their children's dental coverage.