Inflation 2021 | Page 2 | General financial discussion | Discussion forum

dougjp said
I continue to think interest rates as a tool is shelved for some time. BoC said this;

Rather than rate increases which would tank the emerging economy, I look for a return to having some real estate and/or mortgage restraint tool used to try and cap the bubble, although those don't work very well.  

That would be the logical thing to do, however, any politician is too worried about getting re-elected than do the right thing.
With real estate being the only real asset of the majority of people, and funded by cheap mortgage/debt, interest rate have to remain low for a long time. Just look at how the central banks was unwilling to even lift rates back to long time average post 2009 crash and before covid hit. Now real estate prices are even higher and more heavily funded by lower rates...

Are we talking about inflation or are we talking about interest rate. I also expect the inflation will rise sharply in the short run (velocity of money return to normal when there are plenty of money out there). However, this may not translate to higher interest rate because neither the government, nor the small and medium enterprises, nor many people with massive mortgage can afford it. I fully expect to see Yield Curve Control becoming a thing in order to not cause large scale bankruptcy and push the economy into stagflation.

Load up on Gold when it is still low. I prefer MNT as it is back by the federal government.

dougjp said

I think the BoC Governor said otherwise; " no plans to raise interest rates until the economy and employment are back on track, and that will likely take until 2023. " I take that to mean inflation could easily exceed 3%, in a rebound scenario that many are expecting, but clearly he needs both to be on track.  

I’m quite sure that means no interest rate hikes while we have inflation below 3.0%. It would be negligent to not raise interest rates if sustained 3% and above inflation persists. It’s the BoC mandate and I certainly wouldn’t want to be prosecuted for ignoring high inflation. I could see them drawing it out a bit and allowing a bit higher inflation to run a while before hiking interest rates, but unless official changes are made to the target range for inflation management, don’t believe that rates can’t go up. They can!
It’s just that right now inflation is low and certainly interest rates aren’t going up. But everyone needs to understand that it’s not a political decision if inflation gets out of control.

Alexandre said

Fed Chairman Jerome Powell has said repeatedly that the Fed isn't worried about a continued spike in inflation, even though the central bank expects short-lived increases in prices over the summer as the economy reopens fully.

That sounds like financial doublespeak to me.

The Fed has also said higher interest rates aren't planned for a few more years.

Why am I not surprised? (searches frantically for sarcastic emoji).  

Lol, yes. It’s simply a dance around to appease the masses and to not hamstring their options. Of course they will say no planned rate hikes! That calms the masses. But nobody has said we won’t or can’t raise interest rates if inflation takes off, or that politics and big business won’t allow us to raise interest rates. There is an obligation to serve the mandates.