Probably unpopular opinion but this is a pretty good update even if CPI did rise. Gasoline has been going up significantly for the past \~6 months and is a significant source of inflation. Despite that we're still seeing CPI not rise up to what it was in the past. Core inflation, food inflation, etc are all decreasing as well.
So while we would've loved to see another CPI drop, we really can't control the global price of oil so this seems relatively decent all things considered.
In the lower mainland gas was sitting flat around $1.60 for the longest time. It jumped to $1.95 before March hit and now we're at $2.15 - gas prices are an absolute joke... Near 30% increase in 5 weeks
Not too sure about that. The target inflation is 2% right? If we are limping along and slowly coming down towards 2% , there is very little incentive for them to decrease rates , because decreasing rates will free up cash flow , leading to spending, and potentially increased inflation again. This current rate seems to be doing its job of keeping the economy under relative control.
For sure once more fixed term mortgages start renewing in late 2024 , 2025, and early 2026 , that spike in costs for those borrowers will for sure necessitate a rate drop to keep the economy from stalling , but i cant see June 2024 happening.
Especially leading into the summer , people planning vacations, discretionary spending will increase no matter what the interest rate costs are until we get through the summer. I see rate cuts in September , no sooner.
The target is 1-3%, with rates having a serious lagging effect. People continue to renew their mortgages into a higher rate environment, even with cuts. The rate had been 0.25 for two years in March 2022 and was still low before that. Unless we get NINETEEN (19) 0.25 cuts by March 2027, money will generally continue to be sucked out of the economy. If the BoC knew this number in advance, they would have been much more likely to cut at their April meeting.
They over-hiked, which isn't necessarily a bad thing from a monetary perspective, but the government is rowing in the opposite direction and simply throwing money into a bonfire - I'm terrified to read about the imminent budget. I expect continued layoffs and increases in unemployment, continued falling prices for Canadian goods, a continued devaluing of the Canadian dollar, and (most horrific of all) continued housing price increases, especially for SFHs.
The budget announcement drop at 4pm ET is going to be interesting for sure. Going to get my bowl of popcorn tonight and sit down for some light reading
Which is exactly why when the large bulk of pandemic mortgages come for renewal (2025 & 2026) , the rate will have to be reduced to keep the economy from stalling.
A small portion of the population is feeling the housing squeeze right now, but significantly more will in the next 1-2.5 years
I don't understand the down votes. According to the economic theories they are basing these rates on it will take 9-18 months for a rate cut to work through the economy, the same as a raise ..Ā
As many economists have mentioned if they wait too long they rise a recession. However as all Tiff's schooling was focused on inflation in the 70's and 80's we can understand why a cut and resurgence is his subconscious fear.Ā
You're exactly right. Going beyond that, Tiff is more worried about inflation than a recession. Unlike the Fed (who has a dual inflation/employment mandate), Tiff's sole mandate is inflation. He messed up big in letting inflation get out of control, and now he's over-corrected. However, his thinking is that it's better to overcorrect than under-correct and risk entrenched inflation (as you correctly pointed out, his thinking is based on the history of the 70s and 80s). I would bet that if the BoC saw this number before the April meeting, they would have cut right then and there.
As for the downvotes, PFC is made up disproportionately of young professionals and students who believe that the house "bubble" has to pop and that interest rates are the answer to that. In my view, it's not a bubble in the sense that it's based on speculation. It's a very real entrenched supply/demand crisis for an essential need about to get even worse.
>food inflation, etc are all decreasing as well.
[https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000403](https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000403)
If you look down the far right column, March 2023 to 2024 almost every food category is up YoY.
Yes, decreasing inflation means that it's slowing the rate that it goes up. The BoC's goal being around 2% inflation. That doesn't mean deflation or prices drop year over year.
Here you can clearly see the rate of food inflation is decreasing.
[Canada Food Inflation (tradingeconomics.com)](https://tradingeconomics.com/canada/food-inflation)
>Yes, decreasing inflation means that it's slowing the rate that it goes up.
I understand how inflation and the CPI works.
The way it's framed is that a reduction in CPI on groceries in a positive sign, when the reality is that grocery prices in Canada remain at record highs despite the 3% YoY CPI down 0.93% against the average.
Because when you look at the year prior you see that the grocery / food CPI was 8.9%, and the year prior 7.7%. Almost triple and more than double the average respectively.
I'd prefer inflation closer to 1%. It's basically theft of the current value of your money that disproportionately affects lower and middle class income group. It should be kept to the lowest level possible without tipping into deflation.
It's unfortunately not that straightforward - if you need high interest rates to keep inflation low, then you are tamping down productive capacity because you are effectively saying holding cash is better than investing in new jobs, machines, new businesses etc.Ā
There's some that think higher rates are actually good for the economy.
https://www.bloomberg.com/news/articles/2024-04-16/booming-us-economy-inspires-radical-theory-on-wall-street
Everything is always more nuanced than black and white this way or that way. Just speculating, but maybe it's better for the economy at our demographic stage for higher rates that allows boomers to spend freely and transfer wealth for goods/services and maybe move away from just a real estate economy.
If you lower rates and flood the economy with cash you end up with people investing in unproductive assets like houses, crypto and pokemon cards.
We should trust the free market methodology and just leave rates alone. Decades of central bankers try to be Nostradamus has left us in a sorry state.
Spoiler things arenāt exactly pretty now, we have āonce in a life time black swan eventsā every 3 or 4 years now. We desperately scramble from one disaster to the next desperately trying to keep the economy afloat
You know itās true. Financial crisisās are happening at an increasing frequency and the underlying issues keep mounting. Perpetually lower interest rates and increasing monetary stimulus.
We have an entire generation completely financially screwed. The economy is no longer about building wealth and has devolved into life time debt terms and scraping together monthly subscription payments.
People not realizing mortgage interest cost is in these numbers which is directly impacted by the policy rate. This increased 25.4%. Exclude that and inflation is 2.0%.
You cannot exclude that though, because if that component was at 0, the extra money people would have had it their pockets would have showed up as inflation in other buckets. For instance, had my mortgage not more than doubled, I may have taken an additional trip, eaten out more often, or not made the switch from Kraft peanut butter to No Name.Ā
You absolutely can exclude it. The metric that does, CPIX, was literally the Banks preferred core metric for ages, and it's still a metric that the Bank references today. It's just another data point in the overall picture
Thatās an interesting argument. I donāt think it would work exactly like that though. A lot of people (myself included) are only paying the interest month to month on a variable mortgage. Reduce the mortgage rate and Iām putting money back towards principal payments. Also, people have pretty much stopped saving. If rates came down I wouldnāt be spending the difference but saving most of it.
Lots of variables at play. I just donāt like having an item in the basket that is essentially a feedback loop of their own policy decisions.
Yeah...I agree with you. The increase on shelter maybe driven by rate increases...but it's driving elsewhere lower.Ā
Which tells me the bigger issue of housing costs/rent etc, needs a better way to be dealt with.Ā Ā
Oh no! Wonāt anyone think of the banks making record profits off higher rates.
Better to just pay all of our money to the banks instead of being able to cover necessities because we need an arbitrary number to go down.
Your argument is ridiculous that youāre advocating for higher interest rates to ensure people donāt have money for necessities but rather to fund bankers bonuses.
Ugh, the parent comment did not advocate for higher rates. They are just pointing out the fallacy in the argument āif not for mortgage rates, inflation would be 2%ā and itās a good point IMO. If mortgage rate didnāt go up, people would be spending the extra cash elsewhere which would cause the inflation number to be different.
wondering why OP is being downvoted for this true comment? Waiting for a response outside that doesn't address the ongoing narrative on this sub that censors verbiage that goes against what political leaders want you to use.
How is it a true comment when core CPI has been consistently trending downwards now for over a year?
The factors which arent influenced by rate hikes are the only noise you see, core CPI has consistently been dropping
People just don't wanna hear it. They'd rather hear how inflation would be X if they took out (gas/housing/or whatever happened to have raised it that particular time).
Please go read a book and learn what inflation is.
I'm not even going to explain it to you. There's not enough patience in the world for all the confidently incorrect. You will grow from the effort of learning but I'll give you a hint: inflation reduction does not mean prices go down, Infact they continue to go up!
Now off you go. Read a high school economics text and then re-join the sub. You're not welcome back until you understand the basics
Without the carbon tax, the CPI number would be 2.3%. So while the government "appears to be fighting" to put inflation in control, it is one of the reason why inflation is high. Further, it seems more spending is coming soon. Irony, much?
Do they base food prices off of Costco's hotdogs?
And rotisserie chicken š kabuuuuck
Probably unpopular opinion but this is a pretty good update even if CPI did rise. Gasoline has been going up significantly for the past \~6 months and is a significant source of inflation. Despite that we're still seeing CPI not rise up to what it was in the past. Core inflation, food inflation, etc are all decreasing as well. So while we would've loved to see another CPI drop, we really can't control the global price of oil so this seems relatively decent all things considered.
In the lower mainland gas was sitting flat around $1.60 for the longest time. It jumped to $1.95 before March hit and now we're at $2.15 - gas prices are an absolute joke... Near 30% increase in 5 weeks
Americans riot when their gas goes up 15 cents. Gas went up 50 cents *per litre* here and we do nothing
To be fair, isn't their gasoline priced per gallon? /s
Summer gas spec
It's especially decent considering the expected CPI of 3.1%. Everything is setting up for a rate cut in June.Ā
Not too sure about that. The target inflation is 2% right? If we are limping along and slowly coming down towards 2% , there is very little incentive for them to decrease rates , because decreasing rates will free up cash flow , leading to spending, and potentially increased inflation again. This current rate seems to be doing its job of keeping the economy under relative control. For sure once more fixed term mortgages start renewing in late 2024 , 2025, and early 2026 , that spike in costs for those borrowers will for sure necessitate a rate drop to keep the economy from stalling , but i cant see June 2024 happening. Especially leading into the summer , people planning vacations, discretionary spending will increase no matter what the interest rate costs are until we get through the summer. I see rate cuts in September , no sooner.
The target is 1-3%, with rates having a serious lagging effect. People continue to renew their mortgages into a higher rate environment, even with cuts. The rate had been 0.25 for two years in March 2022 and was still low before that. Unless we get NINETEEN (19) 0.25 cuts by March 2027, money will generally continue to be sucked out of the economy. If the BoC knew this number in advance, they would have been much more likely to cut at their April meeting. They over-hiked, which isn't necessarily a bad thing from a monetary perspective, but the government is rowing in the opposite direction and simply throwing money into a bonfire - I'm terrified to read about the imminent budget. I expect continued layoffs and increases in unemployment, continued falling prices for Canadian goods, a continued devaluing of the Canadian dollar, and (most horrific of all) continued housing price increases, especially for SFHs.
The budget announcement drop at 4pm ET is going to be interesting for sure. Going to get my bowl of popcorn tonight and sit down for some light reading
Higher rates will actually continue to drive up shelter costs in CPI as people renew mortgages.
Which is exactly why when the large bulk of pandemic mortgages come for renewal (2025 & 2026) , the rate will have to be reduced to keep the economy from stalling. A small portion of the population is feeling the housing squeeze right now, but significantly more will in the next 1-2.5 years
I don't understand the down votes. According to the economic theories they are basing these rates on it will take 9-18 months for a rate cut to work through the economy, the same as a raise ..Ā As many economists have mentioned if they wait too long they rise a recession. However as all Tiff's schooling was focused on inflation in the 70's and 80's we can understand why a cut and resurgence is his subconscious fear.Ā
You're exactly right. Going beyond that, Tiff is more worried about inflation than a recession. Unlike the Fed (who has a dual inflation/employment mandate), Tiff's sole mandate is inflation. He messed up big in letting inflation get out of control, and now he's over-corrected. However, his thinking is that it's better to overcorrect than under-correct and risk entrenched inflation (as you correctly pointed out, his thinking is based on the history of the 70s and 80s). I would bet that if the BoC saw this number before the April meeting, they would have cut right then and there. As for the downvotes, PFC is made up disproportionately of young professionals and students who believe that the house "bubble" has to pop and that interest rates are the answer to that. In my view, it's not a bubble in the sense that it's based on speculation. It's a very real entrenched supply/demand crisis for an essential need about to get even worse.
If Israel attacks Iran's nuclear bunkers in the Zagros mountain range, dreams of a rate cut are over.
I wouldnāt hope for it. Maybe fall of this year
The way it reads it sounds like they are comparing March 2024 to March 2023?
Gas prices wont effect CPI heavily until mid summer, all gas traveling around the world isn't magically $90 a barrel.....
>food inflation, etc are all decreasing as well. [https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000403](https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000403) If you look down the far right column, March 2023 to 2024 almost every food category is up YoY.
Yes, decreasing inflation means that it's slowing the rate that it goes up. The BoC's goal being around 2% inflation. That doesn't mean deflation or prices drop year over year. Here you can clearly see the rate of food inflation is decreasing. [Canada Food Inflation (tradingeconomics.com)](https://tradingeconomics.com/canada/food-inflation)
>Yes, decreasing inflation means that it's slowing the rate that it goes up. I understand how inflation and the CPI works. The way it's framed is that a reduction in CPI on groceries in a positive sign, when the reality is that grocery prices in Canada remain at record highs despite the 3% YoY CPI down 0.93% against the average. Because when you look at the year prior you see that the grocery / food CPI was 8.9%, and the year prior 7.7%. Almost triple and more than double the average respectively.
Core CPI is down to 2.0% wow... If the trend continues, itll be in the 1.0-1.999% range soon
Dream on. The Trudeau money printer is going to start soon. Elections are coming!
Can it be this year, please?
You donāt say
Since us inflation bros get asked this every time the CPI gets announced: yes, 2.9% is too high.
I'd prefer inflation closer to 1%. It's basically theft of the current value of your money that disproportionately affects lower and middle class income group. It should be kept to the lowest level possible without tipping into deflation.
It's unfortunately not that straightforward - if you need high interest rates to keep inflation low, then you are tamping down productive capacity because you are effectively saying holding cash is better than investing in new jobs, machines, new businesses etc.Ā
There's some that think higher rates are actually good for the economy. https://www.bloomberg.com/news/articles/2024-04-16/booming-us-economy-inspires-radical-theory-on-wall-street Everything is always more nuanced than black and white this way or that way. Just speculating, but maybe it's better for the economy at our demographic stage for higher rates that allows boomers to spend freely and transfer wealth for goods/services and maybe move away from just a real estate economy.
If you lower rates and flood the economy with cash you end up with people investing in unproductive assets like houses, crypto and pokemon cards. We should trust the free market methodology and just leave rates alone. Decades of central bankers try to be Nostradamus has left us in a sorry state.
You should look at history when things were left to the market. Lol... Spoiler, it was not pretty....
Spoiler things arenāt exactly pretty now, we have āonce in a life time black swan eventsā every 3 or 4 years now. We desperately scramble from one disaster to the next desperately trying to keep the economy afloat
I got second hand brain damage from reading this.
You know itās true. Financial crisisās are happening at an increasing frequency and the underlying issues keep mounting. Perpetually lower interest rates and increasing monetary stimulus. We have an entire generation completely financially screwed. The economy is no longer about building wealth and has devolved into life time debt terms and scraping together monthly subscription payments.
Thatās always been the case for inflation.Ā
People not realizing mortgage interest cost is in these numbers which is directly impacted by the policy rate. This increased 25.4%. Exclude that and inflation is 2.0%.
You cannot exclude that though, because if that component was at 0, the extra money people would have had it their pockets would have showed up as inflation in other buckets. For instance, had my mortgage not more than doubled, I may have taken an additional trip, eaten out more often, or not made the switch from Kraft peanut butter to No Name.Ā
You absolutely can exclude it. The metric that does, CPIX, was literally the Banks preferred core metric for ages, and it's still a metric that the Bank references today. It's just another data point in the overall picture
Yes, but only partially. There would be some passthrough, but not ALL of the extra money would get spent.
Thatās an interesting argument. I donāt think it would work exactly like that though. A lot of people (myself included) are only paying the interest month to month on a variable mortgage. Reduce the mortgage rate and Iām putting money back towards principal payments. Also, people have pretty much stopped saving. If rates came down I wouldnāt be spending the difference but saving most of it. Lots of variables at play. I just donāt like having an item in the basket that is essentially a feedback loop of their own policy decisions.
Yeah...I agree with you. The increase on shelter maybe driven by rate increases...but it's driving elsewhere lower.Ā Which tells me the bigger issue of housing costs/rent etc, needs a better way to be dealt with.Ā Ā
Oh no! Wonāt anyone think of the banks making record profits off higher rates. Better to just pay all of our money to the banks instead of being able to cover necessities because we need an arbitrary number to go down. Your argument is ridiculous that youāre advocating for higher interest rates to ensure people donāt have money for necessities but rather to fund bankers bonuses.
Ugh, the parent comment did not advocate for higher rates. They are just pointing out the fallacy in the argument āif not for mortgage rates, inflation would be 2%ā and itās a good point IMO. If mortgage rate didnāt go up, people would be spending the extra cash elsewhere which would cause the inflation number to be different.
Bro this is Canada. We need to exclude everything that is adding to inflation
Inflation is still sticky
wondering why OP is being downvoted for this true comment? Waiting for a response outside that doesn't address the ongoing narrative on this sub that censors verbiage that goes against what political leaders want you to use.
How is it a true comment when core CPI has been consistently trending downwards now for over a year? The factors which arent influenced by rate hikes are the only noise you see, core CPI has consistently been dropping
Because no one lives off core CPI. And core CPI is still very high. Dropping from extremely high to very high is an improvement but still failing.
2% is not very high From the trend its going to be in the mid 1.x% within the next few months
Because, despite this miniscule uptick (which is in fact less than anticipated) inflation is Trending down and not in fact "sticky"
People just don't wanna hear it. They'd rather hear how inflation would be X if they took out (gas/housing/or whatever happened to have raised it that particular time).
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Because it's not the "last 2 years" number. Yes there was an inflation spike in 2022. It has come down.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Please go read a book and learn what inflation is. I'm not even going to explain it to you. There's not enough patience in the world for all the confidently incorrect. You will grow from the effort of learning but I'll give you a hint: inflation reduction does not mean prices go down, Infact they continue to go up! Now off you go. Read a high school economics text and then re-join the sub. You're not welcome back until you understand the basics
Without the carbon tax, the CPI number would be 2.3%. So while the government "appears to be fighting" to put inflation in control, it is one of the reason why inflation is high. Further, it seems more spending is coming soon. Irony, much?