On January 28 the Bank of Canada will be announcing their position on the policy rate. Most of the major Canadian banks predict we are going to hold where we are for most of 2026 and see increases late in the year. It seems that accurately predicting interest rate hikes has similar reliability as a weather forecast or political poll.
Rate hikes reflect either a strengthening economy or one where inflation is ballooning beyond safe measure. In a robust economy, the population can withstand higher rates. Most recently, rate hikes have been used as the tool to control and reset inflation with the intent of landing at 2%.
A year ago, MNP reported that 50% of Canadian households were within $200 of insolvency. Let that sink in.
Around that same time we saw the interest rate increases that were trying to control inflation plateau and retract; they had to in order to prevent collapse. The balance of constraining inflation, keeping the population from over extending credit and maintaining economic drive is a Venn diagram the Bank of Canada has the difficult mandate to manage.
With recent global trade relations showing signs of improvement for Canada, the speculation one might reasonably discern is that these foreign trade relationships have the potential to support the growth of the Canadian economy.
Sometimes, the market’s response to speculation looks similar to actualization. Optimism is important. Realized optimism is even better. And with the current state of optimism, the potential for interest rates to increase feels inevitable. When that will happen is to be determined. But the likelihood that we will see more drops, in my opinion, is low.
So, why is this unqualified opinion landing in your inbox? Well, if you owe money to the bank related to your dental practice, and you have any form of surplus, this might be a great year to increase payments on principal. Getting ahead on professional debt by paying down your principle when rates are as low as they might be for the foreseeable future, is an investment in your own stock.
With no greater predictive guarantee on Canadian economics than your local meteorologist, I share these thoughts because the profitability and sustainability of practice owners is in the best interest of our profession. Keeping the lights on is hard enough as it is in dentistry. My unsolicited advice is get ahead while you can. I expect our current interest rates have more room to rise than to fall.
