Canada's inflation unexpectedly rises in April, upping rate-hike pressure

[CdnFox]

https://ca.finance.yahoo.com/news/canada-annual-inflation-rate-rises-124041246.html
 

Quote

 

OTTAWA (Reuters) -Canada's annual inflation rate rose in April for the first time in 10 months, data showed on Tuesday, adding pressure on the central bank to raise interest rates again after having paused its tightening campaign since January.

Annual inflation unexpectedly rose to 4.4% in April, Statistics Canada said. Analysts polled by Reuters had expected the annual rate to edge down to 4.1% from 4.3% in March. Month-over-month, consumer prices gained 0.7% from March, higher than the forecast 0.4% increase.

"The market is under-pricing the probability the Bank (of Canada) comes back and hikes again," said Derek Holt, vice president of capital markets economics at Scotiabank. "I don't see any slowing down in terms of the underlying price pressures."

The Bank of Canada (BoC) has kept rates unchanged at its last two policy setting meetings as it assesses whether its eight-consecutive rate hikes have been sufficient to tame inflation, which peaked at 8.1% last year.

BoC Governor Tiff Macklem has said that Canadian inflation risks getting stuck significantly above the Bank of Canada's 2% target, and if that happens the central bank is ready to raise interest rates further.

Money markets moved to price in a 22% chance of a Bank of Canada rate increase at its next policy meeting on June 7, up from about 10% before the data.

"Markets are still underweighting the possibility of an insurance hike on June 7th, especially in the context of BoC communications that prioritised the upside risks to inflation and expressed worries about core inflation getting stuck above 3%," said Jay Zhao-Murray, market analyst at Monex Canada.

Higher rent and mortgage interest costs contributed the most to the annual inflation rate in April, Statscan said. The higher interest rate environment may have increased demand and subsequently prices for rentals, the agency said.

The average of two of the BoC's core measures of underlying inflation, CPI-median and CPI-trim, came in at 4.2% compared with 4.5% in March.

"The fact that core measures of inflation remained elevated in April will be disconcerting for policymakers," said Royce Mendes, head of macro strategy at Desjardins Group. "Expect upcoming communications to remain hawkish and focused on bringing inflation to heel, leaving the door open to further rate increases."

The prices for groceries, however, rose at a slower pace in April than in March, helped by smaller price increases for fresh vegetables and coffee and tea, Statscan said. Excluding food and energy, prices rose 4.4% compared with a rise of 4.5% in March.

The month-over-month inflation rate was driven by gasoline prices, which posted the largest monthly increase since October, following an announcement from OPEC+ to cut oil output, Statscan said.

The Canadian dollar was trading 0.3% higher at 1.3425 to the greenback, or 74.49 U.S. cents.

(Reporting by Ismail Shakil and Steve Scherer in Ottawa; Additional reporting by Fergal Smith in Toronto and Dale Smith in Ottawa, Editing by Mark Heinrich, Ed Osmond, Christina Fincher, Alexandra Hudson)

 

So... here's what's going on.

Inflation went up as high as it did because the gov't dumped a buttload of money into the economy in unearned dollars. Arguably some of that was necessary due to covid but that's neither here nor there - that's what happened.

As ALWAYS - that shoots inflation up. Which it did.

So - in response the BoC tries to suck some of that money back out of the economy to cool it. They do that by increasing interest rates.

ANd that will bring down inflation for the most part. At least down to a manageable level if not precisely to target.

BUT - MANY gov'ts including the feds are responding to this BY DUMPING MORE MONEY BACK INTO THE ECONOMY IN UNEARNED DOLLARS!!!!

When you send people 'relief cheques'  -  that makes inflation worse!!  All those 'renatal assistance cheques just drive up the costs

SO you've got the bank stomping on the breaks and you've got the feds and some of the provincial gov'ts stomping on the gas.

This is going to be a disaster.

[eyeball]

Oh well, we'll be in good company given just about everyone on the planet is in the same boat - all cutting off their noses to spite their faces.

Will the pain shared be for shared gain or someone else's?

[CdnFox]

7 minutes ago, eyeball said:

Oh well, we'll be in good company given just about everyone on the planet is in the same boat - all cutting off their noses to spite their faces.

Will the pain shared be for shared gain or someone else's?

Well at this point i think it's mostly for political power. The gov'ts are worried that people struggling will be blamed on them (probably true) so they're spending the money to look like the heros and push the problem down the road.  But as we can see that's a fairly short road.

The "good" news is we will likely fall into a world recession, and that should help a little with inflation.

[Dougie93]

42 minutes ago, CdnFox said:

This is going to be a disaster.

raising rates above the level of real inflation in order to constrain inflation

would incite cascading defaults, mortgages, businesses, provincial governments

thus,  forced to pick their poison, the BoC is likely to pick inflation as the lesser of two evils

[CdnFox]

8 minutes ago, Dougie93 said:

raising rates above the level of real inflation in order to constrain inflation

would incite cascading defaults, mortgages, businesses, provincial governments

thus,  forced to pick their poison, the BoC is likely to pick inflation as the lesser of two evils

They won't tho. I guarantee that. They will drive half the home owners of Canada into default if that's what it takes.

 

[Dougie93]

Just now, CdnFox said:

They won't tho. I guarantee that. They will drive half the home owners of Canada into default if that's what it takes.

I would expect a revolt at that juncture, Freedom Convoys on steroids

[CdnFox]

1 minute ago, Dougie93 said:

I would expect a revolt at that juncture, Freedom Convoys on steroids

Didn't happen last time, won't happen this time.  Remember they had to jack interest rates up to 20 percent thanks to the last trudeau.

People will find a way to hang on, and those who can't will take the hit and turn over their house and move on. We'll enter a recessionary period followed by amazingly slow growth and people will struggle but they'll survive. Quality of life and services will be lower than they should be. It'll be a misery but people will suffer through it because in the end its ALL HARPER'S FAULT!!! 

 

[myata]

1 hour ago, CdnFox said:

This is going to be a disaster.

Who cares if an election is coming? What economy, we have a bottomless pocket here!

[Dougie93]

9 minutes ago, CdnFox said:

Didn't happen last time, won't happen this time.  Remember they had to jack interest rates up to 20 percent thanks to the last trudeau.

People will find a way to hang on, and those who can't will take the hit and turn over their house and move on. We'll enter a recessionary period followed by amazingly slow growth and people will struggle but they'll survive. Quality of life and services will be lower than they should be. It'll be a misery but people will suffer through it because in the end its ALL HARPER'S FAULT!!! 

I can only speak for myself

I've only ever protested once in my entire life

at the request for assistance from Veterans 4 Freedom : stand to

my concern is civil liberties, I don't look to the government for anything else

if the interest rates are low, that reduces my debt

if the interest rates are high, I will generate revenue by way of savings

[CdnFox]

19 minutes ago, Dougie93 said:

I can only speak for myself

I've only ever protested once in my entire life

at the request for assistance from Veterans 4 Freedom : stand to

my concern is civil liberties, I don't look to the government for anything else

if the interest rates are low, that reduces my debt

if the interest rates are high, I will generate revenue by way of savings

well - you can either have debt or savings. You can't really have both. You have a net -net worth.  That's why it's "net" worth

If interest rates go up your debt and savings will be affected about the same over time.

so if you have net savings then higher interest will benefit you, if you have net debt it will hurt you.

As to civil liberties - they are ALWAYS at risk at times of political unrest - and there's always political unrest during tough financial times.

We'll see.  It's a shame the kids will have to go through this.

[RedDog]

The Government of CanaDUH are bold faced liars. My groceries are up at least 30% in a year.

[CdnFox]

12 minutes ago, RedDog said:

The Government of CanaDUH are bold faced liars. My groceries are up at least 30% in a year.

Yes - but there's been a reduction in the cost of anchovy paste and whale blubber - both of which nobody buys - so it all works out  
 

Thats the problem with 'inflation rates' - they tend to include a lot of things not everyone uses.  For the average person the practical or realized inflation rate is higher.

[RedDog]

When did Mr. Noodle hit .89? That’s 50% in a year.

[CdnFox]

29 minutes ago, RedDog said:

When did Mr. Noodle hit .89? That’s 50% in a year.

that is absolutely hilarious - i JUST noticed that EXACT thing in the store this weekend

Well if you're a mr noodles fan you can always still buy at costco

But  the most common foods are up quite a bit. It's very common to see a 3 lb tube of ground beef at 18 dollars, when just a year and change ago you'd think it was crazy to pay more than 10.  chicken is upwards of between 15 and 20  dollars a bird often enough. Eggs just jumped. I don't drink much milk but i'm told that's up.

A whack of it is carbon tax, which is a cumulative tax unlike something like gst.  But whatever it is there's no doubt that food is up a lot more than a lousy 8 percent.

[Dougie93]

5 hours ago, RedDog said:

The Government of CanaDUH are bold faced liars. My groceries are up at least 30% in a year.

technically it is the central bank, the Bank of Canada,  which is directing all this

they print money to buy their own bonds to keep the interest rates low

while accepting inflation as the price of doing business

they are not the government tho, central banks are private cartels