Inflation

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Over the next twelve months I expect

Poll ended at 18 Feb 2017 13:23

Deflation
2
2%
Steady prices (increases of less than 1%)
10
10%
Low inflation (1% to 3%)
64
64%
Medium inflation (3% to 6%)
17
17%
High inflation (more than 6%)
2
2%
Don't know/don't care
5
5%
 
Total votes: 100

Chuck
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Re: Inflation

Post by Chuck »

longinvest wrote: 21 Feb 2018 11:20
($0.50 / $0.20)^(1 / (2017 - 1980)) - 1 = 2.5%.

Let's look at the CPI: (130.8 / 46.2) ^(1 / (2017 - 1980)) - 1 = 2.9% (December 1980 to December 2017)

It would seem that CPI overstates the Kraft Dinner Index inflation. :lol:
I don't think you can use the sale price as a true indicator. Walmart Canada's website lists KD at $1.47 and Walmart rarely deviates from their everyday price. So I'd go with the originally stated 5.5%.

Didn't the CPI used to use a basket of groceries as one of their indicators? Maybe they've watered that down to with all sorts of adjustments to make the numbers come out the way they want.

It seem to me (just from my impression) inflation sometimes runs lower than the CPI on one time/occasional purchase items (like electronics, maybe vehicles, some other manufactured hardware) but quite a bit higher on everyday use things (like food, water, energy, property taxes, alcohol, etc.).
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Re: Inflation

Post by adrian2 »

Chuck wrote: 21 Feb 2018 15:26 I don't think you can use the sale price as a true indicator. Walmart Canada's website lists KD at $1.47 and Walmart rarely deviates from their everyday price. So I'd go with the originally stated 5.5%.
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Re: Inflation

Post by Flaccidsteele »

Chuck wrote: 21 Feb 2018 15:26 I don't think you can use the sale price as a true indicator. Walmart Canada's website lists KD at $1.47 and Walmart rarely deviates from their everyday price. So I'd go with the originally stated 5.5%.
Walmart also price matches. I use Flipp at Walmart and they match the lowest price I can find on the app.

Inflation has floated in a comfortable range for a long time now
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Re: Inflation

Post by big easy »

longinvest wrote: 25 Oct 2016 11:22 Actually, there was a joint statement of the Government of Canada and the Bank of Canada about it:
http://www.fin.gc.ca/n16/data/16-139_1-eng.asp
...
Over the past decade, the global economy has undergone significant economic and financial shocks. Monetary authorities have dramatically extended the limits of their policy toolkits to combat persistent weakness, guard against deflation, repair financial system functioning, and restore confidence. Given such challenges, monetary policy frameworks have themselves come under intense scrutiny.

Throughout this period, the Bank of Canada's flexible inflation targeting framework has continued to demonstrate its value. The well-established credibility of this framework has reinforced the Canadian public's confidence that monetary policy will continue to achieve the inflation target, and helped underpin the Canadian economy through challenging times. These benefits continue to be evident in the wake of the global commodity price shock, enabling monetary policy to support the complex adjustment in the Canadian economy while maintaining overall price stability.

Based on this experience, the Government of Canada and the Bank of Canada agree to renew the inflation target on the following basis:
  • The target will continue to be defined in terms of the 12-month rate of change in the total CPI.
  • The inflation target will continue to be the 2 per cent mid-point of the 1 to 3 per cent inflation-control range.
  • The agreement will run for another five-year period, ending 31 December 2021.
The Bank will continue its research into potential improvements in the monetary policy framework. Before the end of 2021, the Government and the Bank will review the experience over the five-year period, as well as any research insights, and determine the appropriate framework for the years ahead.
...
It seems the Bank of Canada is reviewing the 2% inflation target:
https://www.bankofcanada.ca/2018/11/cho ... rk-canada/
Now, a bigger innovation to the policy framework would be to set a target path for the level of aggregate prices, rather than an inflation rate. This is akin to buying a new house, but in the same neighbourhood.

For example, the central bank could commit to keeping the level of aggregate prices on a steady growth path—say, 2 per cent a year. A way to implement this would be to target an average inflation rate over the medium term.15 This type of framework depends on history; target misses are not treated as bygones, unlike under the current inflation-targeting regime. That means if inflation were to undershoot 2 per cent, the central bank would be committed to making up for it with higher inflation in later years. The opposite would be true with overshoots.
Interestingly, Paul Volcker (yes, that Paul Volcker) recently wrote an opinion piece for Bloomberg arguing against such ideas:
I understand reasonable arguments can be made for 2 percent as an upper limit for “stability.” There is a body of analysis that suggests official price indexes typically overstate increases by failing to account for improvements in the quality of goods and services over time. The point is also made that expectations and behavior are determined by the price of goods, where productivity gains and strong competition restrain price increases, rather than by the cost of services like education and medical care, where productivity gains are slow.

But it is also true, and herein lies the danger, that such seeming numerical precision suggests it is possible to fine-tune policy with more flexible targeting as conditions change. Perhaps an increase to 3 percent to provide a slight stimulus if the economy seems too sluggish? And, if 3 percent isn’t enough, why not 4 percent?
and later on
The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the “easy money,” striving for a “little inflation” as a means of forestalling deflation, could, in the end, be what brings it about.
Is the BoC heading in the wrong direction?
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Re: Inflation

Post by longinvest »

Canadian inflation rate sinks to 1.7% as gas prices fall | CBC News
Lower gas prices pulled Canada's annual inflation rate in November down to 1.7 per cent, the first time in 10 months it has been below the Bank of Canada's two per cent target
Statistics Canada said on Wednesday that gasoline prices fell by 5.4 per cent from November 2017 on lower crude prices and overall energy costs dropped by 1.3 per cent over the same period. In both cases, it was the first year-over-year decline since June 2017.

It also noted that the Bank of Canada's three core inflation measurements came in at 1.9 percent, the first time they have all been below 2.0 per cent since June 2018.
The drop in the overall annual rate was the sharpest in absolute terms since May 2012, when lower gas prices pulled it down to 1.2 per cent from 2.0 per cent in April.
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Re: Inflation

Post by Flaccidsteele »

Inflation in Canada hasn't been a concern since the early 90s; almost a generation

I expect inflation will be tame for awhile yet (recency bias probably)

Personally I think this is awesome. The cost of living in Canada has been fantastic and continues to be very reasonable IMO

Canadian inflation rate sinks to 1.7% as gas prices fall
Statistics Canada said on Wednesday that gasoline prices fell by 5.4 per cent from November 2017 on lower crude prices and overall energy costs dropped by 1.3 per cent over the same period. In both cases, it was the first year-over-year decline since June 2017.

It also noted that the Bank of Canada's three core inflation measurements came in at 1.9 percent, the first time they have all been below 2.0 per cent since June 2018.
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Re: Inflation

Post by ghariton »

Flaccidsteele wrote: 20 Dec 2018 09:27 Iquote]It also noted that the Bank of Canada's three core inflation measurements came in at 1.9 percent, the first time they have all been below 2.0 per cent since June 2018.[/i]
[/quote]
All three measures have been between 1.9 and 2.1 per cent ever since they have been instituted. Remarkable just how steady inflation has been.

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Re: Inflation

Post by Flaccidsteele »

Being Canadian means living in a great place at a great cost of living. Economically, the last 25 years has included some of the best years that I have ever lived through

Typically today, people who see inflation are using a rear-view mirror

BLOOMBERG: Canadian Inflation Falls to 15 Month Low
The inflation slowdown to 1.4 percent in January was in line with economist expectations.

Gasoline prices, which were responsible for a brief spike in inflation last year, are now acting as a major drag. Gas prices fell for a sixth straight month, and were down 14 percent from a year ago.
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Re: Inflation

Post by big easy »

I guess I'll go out and buy that house now. Oh wait, it's doubled in price :( But CPI has been less than 2% for a donkey's age. Hmmm Okay I'll rent instead, that should be affordable. :twisted:
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Re: Inflation

Post by longinvest »

I'll continue here a discussion started in another thread:
longinvest wrote: 08 Jun 2019 07:33
AltaRed wrote: 07 Jun 2019 16:31
longinvest wrote: 07 Jun 2019 16:21 I don't care about the inflation of foreign countries and their central bankers; I live in Canada. I'm confident that the Bank of Canada will continue to "preserve the value of money by keeping inflation low, stable and predictable". (See: Monetary Policy).
You should care some about US inflation and central bank policy there. BoC will have to also protect the loonie's value to some degree as well to stick handle import inflation to which Canadian consumers will be significantly exposed.
I have better things to do in life than worry about foreign politics and monetary policies. It seems that some FWF members like to lose sleep; they've been worried, the last few years, about the impact of the oil price crisis, tariffs, NAFTA, etc. on inflation. Meanwhile, I've slept like a baby while inflation stayed low, stable, and predictable, because the Bank of Canada has a clear and measurable objective with a very flexible framework which consists of two key components that work together: the inflation-control target and the flexible exchange rate.

If the Bank of Canada had to "protect the loonie's value", as you wrote, or if it had to "protect the economy", it wouldn't have the flexibility required to keep inflation on target. But, luckily, its mandate doesn't involve protecting our currency. On the contrary, its monetary policy framework is explicitly based on letting our currency fluctuate.

We've seen this in action from 2014 to 20016, when the Bank of Canada let our dollar drop from $0.94 USD to $0.70 in less than two years, and also significantly dropped its policy interest rate in early 2015, allowing inflation to remain low, stable, and predictable.

Note that if the Bank of Canada hadn't acted, we would have probably experienced deflation due to the severe slow down of Alberta's oil industry. By letting the dollar drop, it created inflation (remember that the goal is 2% inflation, not 0% inflation) and it also increased the profit margins for oil producers who sell in USD yet pay salaries in CAD.

The Bank of Canada's monetary policy is amazing in its simplicity and effectiveness. I encourage FWF members to learn about it and stop losing sleep with unwarranted fears about inflation.
I think that few Canadians understand how effective the Bank of Canada's monetary policy is while being amazingly simple. Maybe I should try to explain it.

At the basis of the idea is the Law of supply and demand. When supply is bigger than demand, prices go down. When supply is smaller than demand, prices go up.

When people have less money, they usually spend less (lower demand). This leads to deflation (lower prices), because sellers get desperate to sell their goods and services (higher supply than demand).

When people have more money, they usually spend more (higher demand). This leads to inflation (higher prices), because sellers can make bigger profits selling less goods (higher demand than supply).

The Bank of Canada wants to control inflation by keeping it low, stable, and predictable, targeting 2% within a range of 1% to 3%. Unfortunately, the bank doesn't control the domestic economy and its actors (companies, governments, workers, consumers), nor does it control foreign trade partners.

But, the Bank of Canada controls the target for the overnight rate, usually called the key policy interest rate. This rate plays an important role in our economy. Through this key policy interest rate, the Bank of Canada can affect the cost of borrowing. The higher it gets, the more expensive it gets to borrow from a bank, the less individuals and companies borrow, the less money they get to buy goods and services (lower demand). The lower the key policy interest rate gets, the less expensive money gets to borrow from a bank, the more individuals and and companies borrow, the more money they get to buy goods and services (higher demand).

In a global economy, the key interest rate also affects the attractiveness of the Canadian dollar. A higher rate makes the Canadian dollar more attractive to foreign investors, increasing its value relative to foreign currencies and, as a result, make foreign goods and services cheaper, lowering the demand for domestic goods and services. A lower rate makes the Canadian dollar less attractive to foreign investors, decreasing its value relative to foreign currencies and, as a result, make foreign goods and services more expensive, increasing the demand for domestic goods and services.

Do you see it, now? The Bank of Canada can, through the key policy interest rate, affect the demand for domestic goods and services. The higher this demand, the higher the prices get. The lower this demand, the lower prices get. That's how it controls inflation.

The Bank of Canada doesn't have a perfect control on inflation. Prices are set on a daily basis by market participants. But, as the Monetary Policy is free from political concerns (such as employment targets, currency exchange rate target), and is based on a single objective of low, stable, and predictable inflation, the Bank has all the freedom it needs to adjust the key policy interest rate to control inflation and, effectively, keep it on target.

I hope that, by now, it has become clear to readers that, if it wasn't for the tight 1% to 3% range around the 2% target, a monkey could drive the key policy interest rate to constantly bring back inflation towards the 2% target. Luckily, our central bank is run by smart humans.

As long as the Bank of Canada doesn't change its Monetary Policy objective and doesn't add political constraints (employment targets, currency exchange rate targets), I won't lose sleep with a fear of inflation deviating from the target range.
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Re: Inflation

Post by AltaRed »

And as I mentioned in the other thread, as a trading nation, we have little control* over import inflation. I am not going to lose sleep over potential future bouts of significant inflation, but I am not going to be cavalier about inflation never becoming a problem in the future either.

* I use gasoline as my favourite example because that is one everyone can relate too. If gasoline prices were to reach $10USD/USgal for one reason or another stateside, that will be directly translatable to gasoline prices at our pumps BECAUSE gasoline is a global commodity and specifically for us, a US commodity. Expand that to a wide range of consumer goods including food imports and I will speculate that maybe 50% of our consumption is directly tied to import pricing. We do care about inflation elsewhere.....
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Re: Inflation

Post by longinvest »

Here's a reply to a post from the other thread, taking into account my previous post.
AltaRed wrote: 08 Jun 2019 11:33
longinvest wrote: 08 Jun 2019 09:21 Mordko, there's another thread dedicated to discuss inflation. Let me just repeat that the Bank of Canada's monetary policy has a clear objective and an effective framework. The Bank of Canada has demonstrated many times within the last 28 years its ability to keep inflation low, stable, and predictable.
The BoC has never had to deal with real forces of global inflation, and specifically US inflation, since the '70s and early 80s. As late as 1991, Canada had a 5.5% inflation rate. That rate, compounded, would double prices (half purchasing power) every ~15 years.

If US inflation starts to run rampant, Canada is pulled along in the draft. There are many of us who went through all this in our early (and mid-career) adult lives. It is really as simple as that.....counting on the US Fed in particular, and the ECB to some degree. As a trading nation, we are a popcorn phart in the overall scheme of things.

So YES, I do care, and while I am cautiously confident OECD central banks learned from the '70s and '80s, it would be smug to be cavalier about it.
If prices of foreign goods get too high, increasing Canadian inflation, the Bank of Canada can simply increase its key policy interest rate. Even if foreign investors ignore this, and the Canadian dollar doesn't increase in value relative to foreign currencies, it will increase domestic borrowing costs. This will increase the rates on new mortgages and mortgage renewals, leading to cheaper house prices... Voila! Housing deflation to compensate for foreign goods inflation.

Not convinced? Just think about what would happen to the Canadian economy and inflation if the Bank of Canada raised its key policy interest rate to 10% tomorrow. Hint: Everyone would pull back money from stocks and bonds and put it into 10% savings account. Thousands of house owners with a floating rate would go into default. Young people willing to buy a small condo would be unable to assume the cost of borrowing. The real estate and construction industries would go to a halt. Hundred of thousands jobs would be lost. The economy would go into a depression. Prices would go down. Inflation would be replaced by deflation.

A monkey could control inflation, if it wasn't for a smooth control.
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Re: Inflation

Post by Clason »

AltaRed wrote: 08 Jun 2019 12:50 I will speculate that maybe 50% of our consumption is directly tied to import pricing. We do care about inflation elsewhere.....
But isn't it fair to say that BoC's basket of goods would contain that 50% of imported goods too? So it basically manages inflation globally, with a target to keep it at a weighted 2%. It may be naive to believe that our little BoC can guarantee a 2% inflation based on our international input, but that is nonetheless what our overlords say.

In a way, Longinvest's argument makes perfect sense. He outsourced inflation management (national and international) to the BoC with a 2% target, so he doesn't have to worry about what the Fed, the BoE or any other banks do to manage or mismanage inflation. If gasoline does go up to $10/gal, it will be reflectes in the BoC basket of good and intereat rates will be "managed" to not exceed a 2% overall inflation target. Where that thinking fails, is when tools available to the BoC can't cope with external pressures. That's what you seem to worry about (and I do too), which appears to be too much to worry about for LI. Personally, I just worry/follow-up out of nerdy personal interest, because diversification and re-balancing takes care of the really worrisome aspect.
Last edited by Clason on 08 Jun 2019 13:07, edited 2 times in total.
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Re: Inflation

Post by longinvest »

The biggest scare of our central bankers isn't runaway inflation; that's easy to stop. Deflation is a much harder issue to solve, as it involves rebooting the economy.

For defensive investors, this keeps some attractiveness to nominal bonds, despite their low yields.
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Re: Inflation

Post by AltaRed »

Clason wrote: 08 Jun 2019 13:04 Where that thinking fails, is when tools available to the BoC can't cope with external pressures. That's what you seem to worry about (and I do too), which appears to be too much to worry about for LI. Personally, I just worry/follow-up out of nerdy personal interest, because diversification and re-balancing takes care of the really worrisome aspect.
That is precisely the point. If import inflation doubles or triples prices of imports, there isn't enough left for BoC to keep its 2% inflation target without sending a whole bunch of stuff like housing into deep deflation.....and that is Deep Depression talk. Potentially millions of homeless, a halt to essentially all construction and massive unemployment. Since that would be akin to hari-kari, my point really is that BoC is limited in its ability to maintain 2% inflation in our economy and that is really the only thing I have been challenging in my posts.

I have no plans to lose sleep over it though. I only have the next 20 years to think about.
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Re: Inflation

Post by Mordko »

longinvest wrote: 08 Jun 2019 13:04 The biggest scare of our central bankers isn't runaway inflation; that's easy to stop. Deflation is a much harder issue to solve, as it involves rebooting the economy.

For defensive investors, this keeps some attractiveness to nominal bonds, despite their low yields.
Recency bias.
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Re: Inflation

Post by longinvest »

Mordko wrote: 08 Jun 2019 15:06
longinvest wrote: 08 Jun 2019 13:04 The biggest scare of our central bankers isn't runaway inflation; that's easy to stop. Deflation is a much harder issue to solve, as it involves rebooting the economy.

For defensive investors, this keeps some attractiveness to nominal bonds, despite their low yields.
Recency bias.
The last runaway deflation goes back to the 1930s and the last runaway inflation goes back to the 1970s.

What do you mean by recency bias?
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Re: Inflation

Post by longinvest »

I think that the 1930s taught central bankers about the folly of attaching currency to a commodity and controlling its supply, and that the 1970s taught central bankers that inflation can be tamed with interest rates.

I'm in awe of the visionaries who put in place our Monetary Policy 28 years ago. It's so simple, yet so effective. There's a beauty to it.

It reminds me of the simplicity and effectiveness of cap-weighted total-market indexing, which also has a beauty to it.
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Re: Inflation

Post by longinvest »

AltaRed wrote: 08 Jun 2019 13:51
Clason wrote: 08 Jun 2019 13:04 Where that thinking fails, is when tools available to the BoC can't cope with external pressures. That's what you seem to worry about (and I do too), which appears to be too much to worry about for LI. Personally, I just worry/follow-up out of nerdy personal interest, because diversification and re-balancing takes care of the really worrisome aspect.
That is precisely the point. If import inflation doubles or triples prices of imports, there isn't enough left for BoC to keep its 2% inflation target without sending a whole bunch of stuff like housing into deep deflation.....and that is Deep Depression talk. Potentially millions of homeless, a halt to essentially all construction and massive unemployment. Since that would be akin to hari-kari, my point really is that BoC is limited in its ability to maintain 2% inflation in our economy and that is really the only thing I have been challenging in my posts.

I have no plans to lose sleep over it though. I only have the next 20 years to think about.
The Bank of Canada would never send our economy into depression to tame inflation. It would simply raise rates sufficiently to keep inflation within the target range, probably nearer to 3%, slowly reducing it to its 2% target. That might send some inefficient sectors of our economy into recession, buy it would likely boost other sectors of our economy, especially those sectors which export goods and services.

If foreign oil became more expensive, Canadian provinces would consume more locally-produced oil. If foreign cars became too expensive, it would allow a domestic car industry to flourish. Imagine an electric car production fueled by Quebec hydro-electricity! Did you know that Canada is a lithium producer? We have a qualified workforce with experience assembling cars (Ontario).

We live in an awesome country.
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Re: Inflation

Post by AltaRed »

Locally produced oil is priced at world prices and so is gasoline within transportation costs. An Edmonton refinery will sell its gasoline in Chicago if it can get a higher margin there than in Calgary. Would still be less expensive in Calgary, but only due to transportation differentials.

Nothing is sold locally at a price lower than what can be sold at export prices assuming of course that the good or service is indeed transportable to that export market. Vendors will always sell where they can get the highest margins.
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Re: Inflation

Post by longinvest »

AltaRed wrote: 08 Jun 2019 17:14 Locally produced oil is priced at world prices and so is gasoline within transportation costs. An Edmonton refinery will sell its gasoline in Chicago if it can get a higher margin there than in Calgary. Would still be less expensive in Calgary, but only due to transportation differentials.
That's awesome for profits, isn't it? I don't see how this would send Alberta into a depression. :wink:
AltaRed wrote: 08 Jun 2019 17:14 Nothing is sold locally at a price lower than what can be sold at export prices assuming of course that the good or service is indeed transportable to that export market. Vendors will always sell where they can get the highest margins.
Profits are good. They repel depressions. :D

My point is this: runaway inflation and deflation aren't real threats to Canada, given the the Bank of Canada's Monetary Policy.
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Re: Inflation

Post by Mordko »

longinvest wrote: 08 Jun 2019 16:17
Mordko wrote: 08 Jun 2019 15:06
longinvest wrote: 08 Jun 2019 13:04 The biggest scare of our central bankers isn't runaway inflation; that's easy to stop. Deflation is a much harder issue to solve, as it involves rebooting the economy.

For defensive investors, this keeps some attractiveness to nominal bonds, despite their low yields.
Recency bias.
The last runaway deflation goes back to the 1930s and the last runaway inflation goes back to the 1970s.

What do you mean by recency bias?
I mean that in OECD deflation has been a problem in recent years and inflation hasn’t. And the risk of deflation has been much more pronounced across the developed world. And that Canada isn’t behind an iron curtain.
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Re: Inflation

Post by snowback96 »

Over the last few years, I don't think deflation has been much of a problem. The threat of deflation certainly has been a concern (i.e. disinflation). Other than Japan, have any OECD countries seen negative core CPI for more than a brief blip?

One of the reasons central banks set an inflation target around 2% is so they can make a policy error and not go negative. Canadian inflation over the last 10 years is about 1.79% so we are not that far off of target (so far). That being said, I see it completely within the realm of possibility that the BOC could lose control in either direction at some point due to either external shocks and/or a policy blunder of some sort.

The BOC has done great for the last 3 decades but we seem to be entering uncharted territory as globalization and free-trade are rolled back. Be careful. Lots of unpredictable things could happen!
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Re: Inflation

Post by ghariton »

Set aside deflation. I recall that one of my first posts twenty years ago in this forum's predecessor was to argue that deflation is not a real threat to the Canadian economy. Yes, I know about Japan, but I would argue that it took a very special kind of screwing up to produce that. We just aren't as inventive as the Japanese.

I take inflation much more seriously. Yes, the Bank of Canada has inflation targets of between 1% and 3%. Yes, by raising interest rates enough, it can stop even high inflation. That's what happened in the early 1980s. I also note that shortly thereafter the Liberals lost power. Of course, correlation is not causation, and an anecdote is not data, but...

Yes, officially the Bank of Canada has only one objective, and that is prices. But the political reality is that the Bank cannot act in disregard of the real economy. All you have to do is read the quarterly reports it issues, to see that it is very much concerned with the state of the economy. So I would not count on big increases in interest rates, short of having already lost control of inflation.

To AltaRed's point: If we were a very large economy, well-diversified and with big markets for products and labour, like the U.S., maybe the Bank could control inflation with just interest rates. But in a small open economy like Canada, there are just too many linkages. For example, the reason Canada was able to get its inflation under control back in the 1980s, was that the U.S. got its inflation under control at about the same time. Our economy is almost totally dependent on the U.S. for output, employment, interest rates, and inflation. That may not be an economic necessity, but it is a political reality.

George

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adrian2
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Re: Inflation

Post by adrian2 »

longinvest wrote: 08 Jun 2019 12:59 If prices of foreign goods get too high, increasing Canadian inflation, the Bank of Canada can simply increase its key policy interest rate. Even if foreign investors ignore this, and the Canadian dollar doesn't increase in value relative to foreign currencies, it will increase domestic borrowing costs. This will increase the rates on new mortgages and mortgage renewals, leading to cheaper house prices... Voila! Housing deflation to compensate for foreign goods inflation.

Not convinced? Just think about what would happen to the Canadian economy and inflation if the Bank of Canada raised its key policy interest rate to 10% tomorrow. Hint: Everyone would pull back money from stocks and bonds and put it into 10% savings account. Thousands of house owners with a floating rate would go into default. Young people willing to buy a small condo would be unable to assume the cost of borrowing. The real estate and construction industries would go to a halt. Hundred of thousands jobs would be lost. The economy would go into a depression. Prices would go down. Inflation would be replaced by deflation.

A monkey could control inflation, if it wasn't for a smooth control.
House prices are not included in the rate of inflation.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
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