The biggest successes in personal finance – or rather, personal finance – this year have been like punches in the face. Why dwell on a year of beatings? The reason for this is that we are heading into a year of even greater uncertainty for household finances, including a possible recession. Understanding where we came from will help you prepare for what awaits you in 2023. Here are the highlights:
January 26: With inflation on the upside, the Bank of Canada has its first opportunity of the year to raise interest rates. We will pass, the central bank said. Later in the year, when rates soared, some economists questioned why the bank waited so long to tackle inflation. Expect further challenges from the bank if rate hikes continue into 2023.
February 16: Inflation is getting serious as Statistics Canada reports that the cost of living jumped 5.1% in January, double the average rate for the previous 40 years. As 2022 draws to a close, we are still well above that level.
February 24: Russia invades Ukraine. A human tragedy with economic repercussions that fueled inflation by driving up energy and grain prices. February was also the month when the average resale price of homes in Canada peaked at $816,720. November’s average price: $632,802, down 22.5% from February. Expect more price cuts next year.
March 2: The Bank of Canada takes inflation seriously, in a way. The overnight rate is rising slightly by 0.25 percentage points in the first of what will turn out to be seven rate hikes.
Mid-June : The average gasoline price in Canada peaked for the year around $2.10 per litre. Prices fell from there, but remained well above year-ago levels for much of 2022. Soaring gasoline prices are increasing demand for electric vehicles, so there was good sure a shortage of these vehicles. Order yours now for delivery in 2024?
July 8: It reminds us all of the importance of the Internet and cell phones for personal finance, among other things, when the Rogers Communications network goes down. If you haven’t tossed cash in the back of a drawer as a precaution against future breakdowns, go for it.
July 13: The Bank of Canada’s overnight rate rises one percentage point, a shock that suggests a much higher level of concern about inflation than at the start of the year. In a flash, people with variable rate mortgages, lines of credit and variable rate loans see their borrowing costs increase dramatically.
July 20: Statistics Canada reports an inflation rate of 8.1% for June, adding some context to the sharp rise in rates earlier in the month. The push and pull of high inflation and soaring rates has the Royal Bank of Canada reaching out and predicting a recession in 2023. Short and sweet, but still a recession.
October 5: News that companies have been granted the ability to add a surcharge to the bill of customers paying for goods and services by credit card. The economics of collecting credit card rewards points is in question if overcharging is widely adopted.
Mid-October: The hellish year for the Canadian bond market reached a crescendo, with the FTSE Canada Universe Bond Index falling nearly 15%. Additionally, the S&P/TSX Composite Index is bottoming out for 2022 with a decline of around 12% since the start of the year. Double-digit losses for stocks and bonds in the same year? You may not see this again in your lifetime.
October 17: The supermarket chain Loblaw Cos. ltd. announces a price freeze on its no-name in-house product line through the end of January. In a bold move, all the inflation that has driven food prices up over the past 12 months is locked up at the peak of freshness. Next question: how much do prices increase in February?
December 7: The permanent increase in interest rates of the year by the Bank of Canada. Will this be the last rate hike before the bank retreats in its fight to quell inflation? Expect January 25, the first rate fixing date in 2023.
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