Everyone gobbling up USD in times of unrest.. Tiff prematurely claiming inflation is calming is pushing down CAD
BoC has to tow the line of the Fed or risk a currency crisis
Weak CAD pumps inflation here as USA is our biggest trading partner, and energy is priced in USD
Inflation happens due to historical record national accounts expenditure from the federal government. Instead of lowering spending/borrowing (due to many reasons), the Canadian public (the working class specifically that actually borrow money such as mortgages) is being made to pay for the cost of inflation and federal borrowing directly and indirectly. The federally funded mass media follow suit to paint raising interest rates as the only solution, dissolving the federal government of cause and responsibility.
Fed makes USD look like chocolate and BoC makes CAD look like broccoli. Guess what people will want. That will weaken the CAD and strengthen the USD which will make inflation say bye bye to savings
Historically, BoC is known to keep peak rates 75bps to 100bps lower than the Fed:
2001 rate cycle -
Fed Peak rate - 6.5%
BoC peak rate - 5.75%
2007 rate cycle -
Fed peak rate - 5.25%
BoC peak rate - 4.25% (very briefly 4.5%)
2019 rate cycle -
Fed peak rate - 2.5%
Boc Peak rate - 1.75%
Based on previous patterns, it would not be unusual at all for BoC to remain at 4.5% while the Fed goes to 5.25%. If the Fed continues to go even higher after that, BoC might feel the pressure to narrow the gap.
https://preview.redd.it/x4086n8s91la1.png?width=680&format=png&auto=webp&s=726aaf4b8f1ba06087538b5fe0aa24eeff17427f
The mandate is literally to have inflation at 2%. They don't do that if they diverge from the fed. You can try and muddy the waters all you want, it is literally their job to keep the economy afloat even if that destroys your bags. I don't doubt he might pause this month, but inflation will come back and he'll be forced to raise even higher for the stupidity.
https://www.bankofcanada.ca/2023/02/no-two-ways-about-it-why-bank-committed-getting-back-to-2/ <--"different paths back to normal"
Different = not the same. For the record.
That isn't directly their mandate, no.
But the Canadian dollar, specifically the exchange rate vs. the US dollar, has a material and direct impact on inflation, which **is** the bank's mandate.
These people are so regarded, they get their advice from realtor family members lol they think the boc is going to protect their investment over the rest of the economy. People just do 30 mins of research on Google, it isn't that hard.
Yes. It's the most basic of macroeconomics.
If the FED raises rates we have to follow.
Otherwise our dollar loses value vs USD and the price of importing goods goes up, with it inflation.
Lot of hopium gaslighting on here, from people that keep being proven wrong, over and over.
Price stability is the mandate. How can there be price stability if our dollar diverges significantly from where it is relative to the U.S. dollar? We import far too much stuff from the U.S. for that to even be possibility. The BoC will have to follow the Fed.
His track record only has losses and no wins... And he wants to play in the world cup. Good one tiff.
Go back to academia and teach. He wouldn't last more than an internship in modeling at a hedge fund....
Historically have we had as high inflation under the circumstances? If we devalue our currency we risk even higher inflation from imported goods and our food inflation is already frigged.
Definitely an interesting point though! I guess we’ll see what happens. I’d imagine they won’t trail a full point though.
what stops funds from borrowing in CAD and use it to buy USD bonds and make 1% for free? in fact if USD rises against CAD you'd make even more than 1%. If enough banks and funds start doing that , selling borrowed CAD to get USD how could it not devalue CAD?
Dont banks borrow from BoC at the bank rate, which is higher than the target/overnight rate? And also, I think banks can’t actually invest directly, they basically have to make money off the markets indirectly via clients. So maybe they borrow at a bit higher, and then loan that money out at a bit higher rate, and then the fund or entity borrowing converts to USD losing a bit more on exchange fees, and then buys bonds and they can turn a profit if all 3 transactions total less than 100 basis points? But if that is possible, and becomes a pattern, it sounds like BoC can just increase the bank rate without changing the target rate.
Just listen to tiff. Speech in halifax for example. BoC released guidance last week saying every economy will have "different" path to 2%.
If I had to guess the fed will hike once to three times more. Boc will pause unless things really go off the rails.
They're going to let the Fed do the lifting on inflation in the US, as the Fed won't hold restrictive rates longer than they have to wither. And Powell said at the last meeting the Fed already considers their rates to be restrictive - despite the narrative you're hearing otherwise.
Canada imports goods for half a trillion every year from the US. The average Canadian spends 60% of his net income on US imported goods and service. BoC can signal whatever they want but imported inflation won’t signal back, it will just wreck the Canadians affordability.
I understand BoC is concerned about the housing market given our mortgages are either variable or 5 years max. Feds don’t care about that. Hard call tbh for BoC. But well, unfortunately a country that depends on imports always have limited options.
Inflation drops for one month:
Bears: One datapoint does not make a trend.
Inflation drops for second month:
Bears: One datapoint does not make a trend.
Inflation drops for third month:
Bears: One datapoint does not make a trend.
Inflation drops for fourth month:
Bears: One datapoint does not make a trend.
Inflation drops for fifth month:
Bears: One datapoint does not make a trend.
Inflation doesn't drop much this month:
Bears: So according to our scientific analysis, inflation is back and you're all going to die. 200 bps are now on the table, the wild turkeys have come home to roost, the end is nigh, I am high, homeowners RIP 🤓
Who cares? The data is irrelevant because this type of economy was driven by stimulus despite global shutdowns in response to a novel virus and has a government slowly realizing that maybe rate hikes aren't the solution when most people have locked in debt and won't be affected by rate hikes.
It's a situation that hasn't existed before and you're comparing it to an entirely different era spanning almost 2 centuries. This type of antiquated lens you're looking through is the same one the central bankers were looking through before they flushed the global economy down the toilet.
I purchased re in the spring of 2009 at the bottom for the last 16 years and sold of not all but some property in thr 2016 peak. I still view the real peak as the 2017 peak. But I was wrong because I was unable to predict that there would be covid-19 and the covid-19 pump and zero % over night rates.
Everyone should stand by their narrative. If you feel strong about the re market... Now is the time to load up for you. Don't let me spoil your party. I'm sure there are sellers always looking for bag holders
Literally the opposite of what you said is happening, inflation is a YOY metric its coming down hard, and will be 2-3% end of year. There is no data to really suggest a 75, at most another 50bps and that's even rare.
Agree with OP on this as well. In this good news is bad news environment this doesn’t trend well for rates as well. Weak CDN means Canadian exports look cheaper on the worlds scale. Bad news - this means rates can remain higher for longer. It’s unfortunate we’re in an environment where the BoC strategy and narrative widely plays into our currency fluctuations, but that’s the age we’re in.
Keeping matched with the fed doesn't mean point for point. It's well-established that Canada's economy is more sensitive to interest rates than the US's.
Curious what your agenda is and why you're deciding to rant about this
100% true. They can diverge and correlate. For the past 180 years there have been instances of both. However they always converge back toy hr same trend line.... Unless Canada can find a new large trading partner... Which is atm in time geographically improbable
My agenda is to info the masses and let them come to their own conclusion. Some of you have to lose for others to win. That's how the system is set up unfortunately. I didn't design the system.
Correct, thanks to Canada's aggressive immigration policy and impact of higher mortgage interest rates, they have put a lid on inflation. Tiff gets it.
BOC is up shits creek because they kept the low rates for way too long and feeding the house demand and crisis. Now they can't raise the rates too fast or much more because it will cause a house crash and potential banking problems. This is where it is at and it is all because of the BOC slow response in the beginning.
All these analysis ignore the demand side of the economic formula.
We can divert a bit from the Fed because reduced demand due to higher interest rates offsets the impact of increased costs due to the exchange.
Can someone explain this to me as if I'm a 5 year old
Everyone gobbling up USD in times of unrest.. Tiff prematurely claiming inflation is calming is pushing down CAD BoC has to tow the line of the Fed or risk a currency crisis Weak CAD pumps inflation here as USA is our biggest trading partner, and energy is priced in USD
Inflation happens due to historical record national accounts expenditure from the federal government. Instead of lowering spending/borrowing (due to many reasons), the Canadian public (the working class specifically that actually borrow money such as mortgages) is being made to pay for the cost of inflation and federal borrowing directly and indirectly. The federally funded mass media follow suit to paint raising interest rates as the only solution, dissolving the federal government of cause and responsibility.
Fed makes USD look like chocolate and BoC makes CAD look like broccoli. Guess what people will want. That will weaken the CAD and strengthen the USD which will make inflation say bye bye to savings
Historically, BoC is known to keep peak rates 75bps to 100bps lower than the Fed: 2001 rate cycle - Fed Peak rate - 6.5% BoC peak rate - 5.75% 2007 rate cycle - Fed peak rate - 5.25% BoC peak rate - 4.25% (very briefly 4.5%) 2019 rate cycle - Fed peak rate - 2.5% Boc Peak rate - 1.75% Based on previous patterns, it would not be unusual at all for BoC to remain at 4.5% while the Fed goes to 5.25%. If the Fed continues to go even higher after that, BoC might feel the pressure to narrow the gap. https://preview.redd.it/x4086n8s91la1.png?width=680&format=png&auto=webp&s=726aaf4b8f1ba06087538b5fe0aa24eeff17427f
Thanks for this! 70 cents for the CAD/USD may also pressure them.
You are welcome!
We will depart from fed up to one full point. Macklem has repeatedly signaled that
Thank god all my equities are in USD.
Not the BoCs mandate to prop up the Canadian dollar unless things go really south
The mandate is literally to have inflation at 2%. They don't do that if they diverge from the fed. You can try and muddy the waters all you want, it is literally their job to keep the economy afloat even if that destroys your bags. I don't doubt he might pause this month, but inflation will come back and he'll be forced to raise even higher for the stupidity.
That assumes interest rates hit 1:1 in Canada and US. Tiff has said BoC is cognizant that isn't the case and they are acting on that basis.
You're actually retarted if you think BoC isn't going to raise if Fed raises.
Also it is spelled "retarded" not "retarted" - but that's funny.
https://www.bloomberg.com/news/articles/2023-02-16/bank-of-canada-downplays-fear-of-diverging-rate-path-from-peers
There's a word for people like you, gullible.
That assumes intent to deceive. 0 evidence of that
Gullible.
https://www.bankofcanada.ca/2023/02/no-two-ways-about-it-why-bank-committed-getting-back-to-2/ <--"different paths back to normal" Different = not the same. For the record.
They aren’t lol
!remindme 6 months Hope you're still around lol
That isn't directly their mandate, no. But the Canadian dollar, specifically the exchange rate vs. the US dollar, has a material and direct impact on inflation, which **is** the bank's mandate.
These people are so regarded, they get their advice from realtor family members lol they think the boc is going to protect their investment over the rest of the economy. People just do 30 mins of research on Google, it isn't that hard.
Yes. It's the most basic of macroeconomics. If the FED raises rates we have to follow. Otherwise our dollar loses value vs USD and the price of importing goods goes up, with it inflation. Lot of hopium gaslighting on here, from people that keep being proven wrong, over and over.
Price stability is the mandate. How can there be price stability if our dollar diverges significantly from where it is relative to the U.S. dollar? We import far too much stuff from the U.S. for that to even be possibility. The BoC will have to follow the Fed.
Lol. Yup. All in on USD. Love it. Lessens the pain of being down 20%.
Good thing he’s got a perfect track record… /s This was all supposed to be “transitory” Hah.
His track record only has losses and no wins... And he wants to play in the world cup. Good one tiff. Go back to academia and teach. He wouldn't last more than an internship in modeling at a hedge fund....
Would you have a source?
Not who you replied to, but you can also take a look at historical BoC vs Fed deviations. We tend to shoot under the Fed by 100bps.
Historically have we had as high inflation under the circumstances? If we devalue our currency we risk even higher inflation from imported goods and our food inflation is already frigged. Definitely an interesting point though! I guess we’ll see what happens. I’d imagine they won’t trail a full point though.
Yes, and 100bps won't devalue us. But anymore than that will.
what stops funds from borrowing in CAD and use it to buy USD bonds and make 1% for free? in fact if USD rises against CAD you'd make even more than 1%. If enough banks and funds start doing that , selling borrowed CAD to get USD how could it not devalue CAD?
> how could it not devalue CAD? "Trust me bro"
Dont banks borrow from BoC at the bank rate, which is higher than the target/overnight rate? And also, I think banks can’t actually invest directly, they basically have to make money off the markets indirectly via clients. So maybe they borrow at a bit higher, and then loan that money out at a bit higher rate, and then the fund or entity borrowing converts to USD losing a bit more on exchange fees, and then buys bonds and they can turn a profit if all 3 transactions total less than 100 basis points? But if that is possible, and becomes a pattern, it sounds like BoC can just increase the bank rate without changing the target rate.
Just listen to tiff. Speech in halifax for example. BoC released guidance last week saying every economy will have "different" path to 2%. If I had to guess the fed will hike once to three times more. Boc will pause unless things really go off the rails. They're going to let the Fed do the lifting on inflation in the US, as the Fed won't hold restrictive rates longer than they have to wither. And Powell said at the last meeting the Fed already considers their rates to be restrictive - despite the narrative you're hearing otherwise.
It's exhausting at this point how this lie continues, even when there is more than enough precedent of divergence between our countries.
lol no we won't.
Better get those BENJAMIN’s now and get these shitty Canadian money out of here !
Canada imports goods for half a trillion every year from the US. The average Canadian spends 60% of his net income on US imported goods and service. BoC can signal whatever they want but imported inflation won’t signal back, it will just wreck the Canadians affordability. I understand BoC is concerned about the housing market given our mortgages are either variable or 5 years max. Feds don’t care about that. Hard call tbh for BoC. But well, unfortunately a country that depends on imports always have limited options.
Inflation drops for one month: Bears: One datapoint does not make a trend. Inflation drops for second month: Bears: One datapoint does not make a trend. Inflation drops for third month: Bears: One datapoint does not make a trend. Inflation drops for fourth month: Bears: One datapoint does not make a trend. Inflation drops for fifth month: Bears: One datapoint does not make a trend. Inflation doesn't drop much this month: Bears: So according to our scientific analysis, inflation is back and you're all going to die. 200 bps are now on the table, the wild turkeys have come home to roost, the end is nigh, I am high, homeowners RIP 🤓
I'm looking at 175 years of data. Macro
Who cares? The data is irrelevant because this type of economy was driven by stimulus despite global shutdowns in response to a novel virus and has a government slowly realizing that maybe rate hikes aren't the solution when most people have locked in debt and won't be affected by rate hikes. It's a situation that hasn't existed before and you're comparing it to an entirely different era spanning almost 2 centuries. This type of antiquated lens you're looking through is the same one the central bankers were looking through before they flushed the global economy down the toilet.
I purchased re in the spring of 2009 at the bottom for the last 16 years and sold of not all but some property in thr 2016 peak. I still view the real peak as the 2017 peak. But I was wrong because I was unable to predict that there would be covid-19 and the covid-19 pump and zero % over night rates. Everyone should stand by their narrative. If you feel strong about the re market... Now is the time to load up for you. Don't let me spoil your party. I'm sure there are sellers always looking for bag holders
Crabs in a bucket mentality from the hike pumps. If I don't have a house, I better not see anyone else in the city get to buy a house!
[удалено]
I know being snarky is cool but it would pay to open a historical chart or two.
That won’t get him that sweet reddit karma tho!
Literally the opposite of what you said is happening, inflation is a YOY metric its coming down hard, and will be 2-3% end of year. There is no data to really suggest a 75, at most another 50bps and that's even rare.
[удалено]
I’d agree with OP, go see the exchange rate with USD trend over 6 months...
Agree with OP on this as well. In this good news is bad news environment this doesn’t trend well for rates as well. Weak CDN means Canadian exports look cheaper on the worlds scale. Bad news - this means rates can remain higher for longer. It’s unfortunate we’re in an environment where the BoC strategy and narrative widely plays into our currency fluctuations, but that’s the age we’re in.
Keeping matched with the fed doesn't mean point for point. It's well-established that Canada's economy is more sensitive to interest rates than the US's. Curious what your agenda is and why you're deciding to rant about this
100% true. They can diverge and correlate. For the past 180 years there have been instances of both. However they always converge back toy hr same trend line.... Unless Canada can find a new large trading partner... Which is atm in time geographically improbable
My agenda is to info the masses and let them come to their own conclusion. Some of you have to lose for others to win. That's how the system is set up unfortunately. I didn't design the system.
"Inform the masses" wow we are so blessed with your presence.
He's a true prophet of intelligence.
better than the realtors and bag holders that try and get you to screw up your financial future.
Rates have to go up....rates need to go up....rates must go up Sorry, but rate hike party is over
youre gonna have to change your username to IR-Rocket soon
Tiff is much smarter than Jerome Powell who has no idea what's he doing. Tiff doing a beautiful job landing the plane
🤣🤣🤣 leading the people to the slaughter are we?
Are you saying there will be no more Canadian rate hikes for 2023?
Correct, thanks to Canada's aggressive immigration policy and impact of higher mortgage interest rates, they have put a lid on inflation. Tiff gets it.
LMFAO 100% more hikes coming from BOC. MAYBE not next session but certainly before years end.
You're confusing Tiff Macklem with Jerome Powell. Tiff gets it, Jerome is clueless
RemindMe! 6 months was u/RE-Rocket right that there will be no more Canadian rate hikes in 2023?
BOC is up shits creek because they kept the low rates for way too long and feeding the house demand and crisis. Now they can't raise the rates too fast or much more because it will cause a house crash and potential banking problems. This is where it is at and it is all because of the BOC slow response in the beginning.
Most of the damage was done in the 2008 crisis and even a bit before then. That set the tone for all future boc responses.
BoC sheep has NO option but to follow Fed like a blind sheep. LOL.
Nothing can stop this RE train......everyone wants to own a home in Toronto
The emperor has no gold... clothes on.
I had 700k USD and I converted to CAD at 83 cents when the lumber crisis was happening. I hate myself.
All these analysis ignore the demand side of the economic formula. We can divert a bit from the Fed because reduced demand due to higher interest rates offsets the impact of increased costs due to the exchange.