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Email this10:01 am
April 6, 2013
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Details from Statistics Canada: The Daily: Consumer Price Index, February 2022
11:23 am
October 27, 2013
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The US Fed rate increase was only 25bp today so that isn't going to have much effect on reining in inflation. I guess they needed to start off gentle but it seems like hitting a tiger with a cooked noodle.
12:04 pm
November 8, 2018
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Early February 2022.
Bank of Russia:
Inflation near 8.8%
Raises key rate to 9.5%
Bank of Canada:
Inflation near 5%
Keeps key rate at .25%
----------------------------
March 2022.
Bank of Russia:
Inflation goes up by 2% in 2 weeks
Raises key rate to 20%
Bank of Canada:
Inflation near 6%
Raises key rate to .5%
------------------
Can we please invite Bank of Russia governor Elvira Nabiullina to run Bank of Canada? Pretty please?
12:10 pm
October 27, 2013
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The Russian situation is an anomaly. It is designed to prop up the rouble/ruble from doing a hard face plant to near zero which would exacerbate their inflation even more. The Russians will default anyway most likely.
12:12 pm
March 30, 2017
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Can we please invite Bank of Russia governor Elvira Nabiullina to run Bank of Canada? Pretty please?
I am sure you will regret that wish if it comes true 🙂
hint: think Zimbabwe and its currency.
12:27 pm
April 6, 2013
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AltaRed said
The US Fed rate increase was only 25bp today so that isn't going to have much effect on reining in inflation. I guess they needed to start off gentle but it seems like hitting a tiger with a cooked noodle.
The interest rate hikes so far are not to fight the inflation we are seeing. The hikes are to undo the supportive emergency low rates that are no longer needed. I see that hike-to-fight-inflation narrative as a misinterpretation by the media.
In his March 3 speech, the Bank of Canada governor explains the three key elements of the current inflation. Excess demand, that would be addressed by higher interest rates, is not an issue yet:
…
This brings me to the third element of the inflation story—the overall balance of demand and supply in the economy. As we indicated in January, a wide range of measures suggest economic slack has been absorbed. The spread of the Omicron variant was a tough way to start the year, with 200,000 jobs lost in January—mostly among the same services sector workers who have borne the brunt of pandemic layoffs all along. But other data have generally been robust, and with public health restrictions now easing, we expect strong growth to resume. With the economy just back to its potential output, the elevated inflation we are experiencing today is not the result of too much demand in the economy. But if we look ahead, with slack absorbed and considerable momentum in demand, we need higher interest rates to dampen spending growth so that demand does not run significantly ahead of supply.In practice, the three key elements driving inflation are interacting to push inflation up. But raising the policy rate will not fix supply chain disruptions, nor will it lower oil prices. …
12:37 pm
October 21, 2013
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As usual, the BoC is way behind what is going on in the real world.
Nero fiddled while Rome burned.
12:41 pm
January 12, 2019
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savemoresaveoften said
Can we please invite Bank of Russia governor Elvira Nabiullina to run Bank of Canada? Pretty please?I am sure you will regret that wish if it comes true 🙂
hint: think Zimbabwe and its currency.
IOW ... "Careful What You Wish For" 
- Dean
" Live Long, Healthy ... And Prosper! "
1:00 pm
January 13, 2022
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The purpose of interest rate hikes is not to deal with inflation? What the heck do you think it's for, then? If central banks don't get realistic about raising rates in a meaningful way, the damage could be catastrophic. The problem is that they're sh@* scared of cratering the economy. Governments and banks have been complicit in creating a culture of debt in North America. Few countries are more in debt per capita than Canada. I think rate increases will cause a lot of hardship and pain, and possibly result in a change in government. But left unchecked, inflation will continue to soar, and coupled with a retreat of economic growth, the possibilities are far worse than a small percentage of Canadians losing their homes and a significant retraction in home prices (which I think would be a good thing, but our government seems to disagree despite what they claim).
1:12 pm
October 29, 2017
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It’s the same narrative. The inflation exists regardless of the cause and not increasing rates means there are too many people getting hit. April will be an entire year of high inflation and one measly 25bps increase at this time, is too late. All I can say is at least we aren’t 7.9% like the U.S.
1:26 pm
November 7, 2014
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Vatox said
All I can say is at least we aren’t 7.9% like the U.S.
Just wait until the rising fuel costs properly hit the supply chain!
2:04 pm
November 8, 2018
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savemoresaveoften said
Can we please invite Bank of Russia governor Elvira Nabiullina to run Bank of Canada? Pretty please?I am sure you will regret that wish if it comes true 🙂
I think my message may have lost in translation.
The war started on February 24th. Early February is still peace. Inflation in Russia was comparable to Canada in early February. Their inflation target is 4%, Canadian is 3%. Close enough.
Compare key rate from two Central Banks: night and day.
Then, some event happens that is triggering inflation. Instead of saying "inflation is transitory" and saying "maybe, sometimes next month, perhaps we will increase key rate, by at most 1/2%" she takes drastic measures.
She does her job, even if political leadership is failing theirs.
Elvira Nabiullina is a woman, but out of all Central Banks governors she is the only one who has balls.
Nowadays, she may be a captain of Titanic when it comes to keeping the rouble afloat, but she has my respect as she does everything she can and should to not let it sink.
3:01 pm
April 6, 2013
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lifeonanisland said
The purpose of interest rate hikes is not to deal with inflation? What the heck do you think it's for, then? …
The hikes are to reverse the emergency cuts at the start of the pandemic. There isn't going to be any dampening on inflation until interest rates climb above what they were before the pandemic.
Not going to be disaster either. Credit card borrowers didn't see a drop in borrowing rates during the pandemic and won't see an increase either when prime rate climbs from Bank of Canada hikes. Mortgage borrowers have been stress tested for higher rates.
3:30 pm
April 14, 2021
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lifeonanisland said
The problem is that they're sh@* scared of cratering the economy.
According to economist Gary Schilling, out of the last 12 times interest rates were raised to combat inflation, 11 of them caused a recession.
3:39 pm
February 7, 2019
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Alexandre said
savemoresaveoften said
Can we please invite Bank of Russia governor Elvira Nabiullina to run Bank of Canada? Pretty please?I am sure you will regret that wish if it comes true 🙂
I think my message may have lost in translation.
The war started on February 24th. Early February is still peace. Inflation in Russia was comparable to Canada in early February. Their inflation target is 4%, Canadian is 3%. Close enough.
Compare key rate from two Central Banks: night and day.Then, some event happens that is triggering inflation. Instead of saying "inflation is transitory" and saying "maybe, sometimes next month, perhaps we will increase key rate, by at most 1/2%" she takes drastic measures.
She does her job, even if political leadership is failing theirs.Elvira Nabiullina is a woman, but out of all Central Banks governors she is the only one who has balls.
Nowadays, she may be a captain of Titanic when it comes to keeping the rouble afloat, but she has my respect as she does everything she can and should to not let it sink.
She also has AK-47's!
And thankfully, Canada's PM doesn't send those who disagree with the country's banker to prison for life...
| CGO |
5:06 pm
October 29, 2017
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HermanH said
lifeonanisland said
The problem is that they're sh@* scared of cratering the economy.According to economist Gary Schilling, out of the last 12 times interest rates were raised to combat inflation, 11 of them caused a recession.
And those recessions are resets that weren’t allowed to play out. Which is why all the problems keep building up, higher and larger. Society has forgotten how everything works and has switched to whatever they want at a given moment. All of the protocols were put in place to manage the system and those protocols have been ignored or sidelined.
7:02 pm
September 11, 2013
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I agree on that, Vatox, we are people that will not tolerate the party ending, even for a necessary while, and the successful politicians realize they are required to cater to that sentiment if they want to remain in office.
2:59 am
November 18, 2017
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The Russian interest rate increase was not to dampen inflation, which was minimal before the war against Ukraine. It was to try to stop money from flowing out of the country and its investment climate.
Wealthy Russians were caught between massive loss of purchasing power due to the ruble's collapse, and the threat of frozen assets outside the country. The high interest rate was a carrot to keep that cash at home.
Not that investment in Russia is exactly like it is in the U.S. and other western countries - the government can finance whatever it wants without much regard to public confidence.
Using interest rates to control inflation is a small, secondary use (one might even say misuse) of the lever. And it can only be used gently, because high interest rates drive up business and consumer costs, which are MAJOR causes of inflation.
RetirEd
RetirEd
9:27 am
January 13, 2022
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HermanH, you may be right that, in the past, recessions have been one outcome of interest rate hikes to battle inflation. I wouldn't disagree. But I also totally agree with Vatox and Bill...and I guess it's all in how you view a recession. Some might view it as really negative thing. I see it as something that helps heal the inequities and imbalances in a financial system, and the prelude to better times ahead. The situation could be defused with meaningful interest rate increases, not weak attempts like those we've seen so far. This would yield harsh short term hardships, but that's the pill we need to take to get out of this cycle of debt slavery. However, as Bill notes, we are people that will not tolerate the party ending.
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