Potential Scenario with High Inflation and Debt

• Inflation Surge: As inflation rises past 2.5%, the cost of goods and services could increase rapidly, eroding purchasing power.

• Debt Devaluation: If inflation outpaces interest rates, existing debts (e.g., mortgages, loans) could become harder to repay in real terms, creating financial strain for consumers.

• Interest Rate Hikes: The Bank of Canada may raise rates to combat inflation, leading to higher borrowing costs.

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Suggested Call for Action for Consumers in This Scenario:

1. Lock in Fixed Interest Rates: If you have variable-rate debt, try to lock in fixed rates before inflation drives up rates further.

2. Refinance Debt: Consider refinancing high-interest debts now, while rates remain lower, before inflation drives them up.

3. Build an Emergency Fund: With inflation on the rise, ensure you have cash reserves to cover essential expenses in case of economic instability.

4. Focus on Asset Protection: Invest in assets that tend to hold value against inflation, such as real estate, precious metals, or inflation-protected securities.

5. Cut Non-Essential Spending: As costs rise, prioritize essentials and reduce discretionary expenses to protect your financial stability.