> **The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.**
What does that even mean?
I think it means they want to avoid people perceiving that there will be chronically high inflation because the psychology of the average person can contribute to it.
The problem with that is that they didn't dare raise the interest rate even a quarter of a point in response to multi-decade high inflation so that fear is actually justified.
> The problem with that is that they didn't dare raise the interest rate even a quarter of a point in response to multi-decade high inflation so that fear is actually justified.
You're spot on, I find this absolutely terrifying.
Are we really so afraid of making debt just a little bit more expensive with our current economic conditions? Why?
because we're all technically "indebted" to our "owners". forever. that's what inflation truly is. it only effects some people. those affected by inflation are owned.
>because we're all technically "indebted" to our "owners". forever. that's what inflation truly is. it only effects some people. those affected by inflation are owned.
Bolshevik revolution affected everybody.
~10% market drop usually isn't the time to increase rates.
Inflation is very tied to perception. If people think cars are going to be more expensive next year, they will buy a car this year, increasing demand, increasing price. Anecdotally, I know a few people who are holding out for a new car for when supply increases and they have more choice, indicating that the public still believes that it's transitory supply constraints. That's a good thing.
On the housing side it does seem like people are trying to get in before it goes up more. Once again supply is the lowest in recent times, indicating that it's also a supply issue and everyone seems to be holding onto what they have.
I disagree Let the rate rise and market drop. It will unwind and fix itself in time.
Build a house on a shitty foundation and it's going to come to roost. Better start fixing it now.
If our economy is so precarious that 0.25% rise causes the BoC to pause, we are in a world of trouble.
Agree with your other points though, well said.
It’s not just current owners holding, it’s the lack of new build and new construction. Even with supply chain shortages causing delayed construction, even under the best circumstances there will be still shortages going forward. I’m honestly not sure how anything changes in housing in heavy areas like TO or Vancouver. Interest rates aren’t going to change demand enough to make up for the shortages we have on the build side of the equation
I agree. And supply of housing needs years of lead time because of all the zoning and permitting.
Vancouver takes 2-3 years just to do the rezoning and permit approval of modest project, with a year or two before and after that for design and construction. It's a slow moving beast.
And that’s assuming you have a compliant municipal government. Many, many places do not. The amount of NIMBYism that slows housing projects is major issue in and of itself.
There is no magic bullet for this. We are in for a long and slow and painful housing fix if any government wants to even focus on it
Inflation begets more inflation. People hoarding...wage pressures...they will have to stomp it out at some point. Why wouldn't I buy all the canned goods in the store if I expected them to be 10% more expensive next year? If everyone did that they'd be 200% more expensive next year.
> Why wouldn't I buy all the canned goods in the store if I expected them to be 10% more expensive next year?
This is the part where living in a tiny condo sucks lol. I don't even have a damn pantry.
>> expectations do not become embedded in ongoing inflation.
>
> What does that even mean?
It's a bit of psychology in how people perceive current prices and how they think prices will be in the future:
> Built-in inflation is induced by adaptive expectations, and is often linked to the "price/wage spiral". It involves workers trying to keep their wages up with prices (above the rate of inflation), and firms passing these higher labor costs on to their customers as higher prices, leading to a feedback loop. Built-in inflation reflects events in the past, and so might be seen as hangover inflation.
* https://en.wikipedia.org/wiki/Inflation#Keynesian_view
> Inflationary expectations play a role because if workers and employers expect inflation to persist in the future, they will increase their (nominal) wages and prices now. (See real vs. nominal in economics.) This means that inflation happens now simply because of subjective views about what may happen in the future. Following the generally accepted theory of adaptive expectations, such inflationary expectations arise because of persistent past experience with inflation.
* https://en.wikipedia.org/wiki/Built-in_inflation
Inflation becomes a self-fulfilling prophecy.
They still plan on raising interest rates and doing quantitative tightening.
There mandate is also regarding ongoing inflation (2 year outlook), not just near term inflation spikes. Also, rate hikes don't have much of an effect on near term inflation.
How is it that Switzerland has an inflation rate under 1% but the Eurozone has an inflation rate of 5% if it's being caused by "supply chain issues"?
There are always supply chain issues.
> There are always supply chain issues.
Our response to COVID19 has had the greatest impact on our supply chain in our lifetimes. You can't hand wave the impact of supply chain management these past two years as "there are always supply chain issues." The impact is massive... the demand has not been greater than prepandemic, but the supply has been much shorter. Interest rates don't do diddly squat to resolve global supply chain issues, it just curbs some demand of elastic goods.
The implication of increasing the cost of borrowing will somehow reduce the prices of housing and food is that we are fine with homelessness and starvation to resolve inflation. You can't hide from reckless spending and shut down economies over a virus and expect that costs won't eventually come up. Spreading the costs over time is like slowly ripping off a bandage.
There are not always supply chain issues. 2020- now have been the worst in more than a decade. With manufacturing plants shutting down due to COVID. Floods in BC, closing down rail lines. Protests on rail lines in Mar 2020. Chinese plants shutting down for over a month extra after chinese New Year in 2020 due to COVID. Chinese Ports shutting down due to COVID and then causing month long congestion.
That isn't standard
Maybe because the Swiss don't buy much locally and do most of their shopping cross border?
This is a complete shot in the dark and based on little to no research to back this claim. I am hoping by saying something wrong someone smarter can quickly provide the real answer.
I just read this as “we hold assets in this inflated market and don’t wait interest hikes to cause a decrease in value of assets”. No, they don’t give a shit about the average Joe.
We’ve been over due for a recession for years now. I guess they will keep it artificially inflated with more money printing and cheap debt. They will just have to keep giving us more debt to even keep the economy functional at this point. What a bunch of idiots we got running this circus. The longer this goes on, the more suffering that will happen when the bubble pops.
I work in supply chain. Yes it is a big factor for inflation. Not the only one though. Inflation wouldn’t go down to 3% if you solved every supply chain issue today. They are just giving lip service to make us feel like they actually give a shit. They won’t have a working class if they keep this up.
Surprised oil and home depreciation was not mentioned:
> This product-level information matters. Knowing what their prices are and their importance for the average consumer, we can decompose what’s driving the overall 4.8 percent inflation rate. I do this below and the results are both surprising and important: recent increases are driven mainly by gasoline and the depreciation of our homes (or, in StatCan’s wording, “homeowners’ replacement costs”).
>
> Combined, they account for roughly 9 percent of the overall basket of goods and services in the consumer price index. But—and this is the surprising part—they account for a clear majority of the increase in measured inflation recently. Let that sink in.
>
> Had just these two specific items not increased in price over the past year, Canada’s inflation rate would have been close to normal. With just two items driving the overall average, it’s worth understanding what’s going on with each.
* https://thehub.ca/2022-01-25/making-sense-of-high-inflation-in-canada/
The general public freaks out over the headline number, but it's worth digging into the details.
It is ridiculous, when I started looking for houses in our preferred area they were 1 million for a nice, newish detached. By the time we bid and lost, they were already at 1.4. We panicked and bought a detached strata house for 1.2M, now the same strata houses are selling for 1.35M, detached are selling for 1.5M. I don't care about the increasing property value, we are here to live long term and not make profit. I am not sure how the younger generation is going to afford a house. Heck, I don't even mind my property value going down so that people can afford it.
> I am not sure how the younger generation is going to afford a house.
They're not. It's flat-out impossible right now. Carrying costs may be low(er) due to low mortgage rates, but the downpayment is impossible to save for. If you don't have family helping you buy, you don't buy.
And where are they supposed to live? I'm guessing anyone with the money to afford those real estate prices isn't going to be working in the lower paid labor pool.
We (The younger generation) don’t buy houses here. We move away to places where it’s affordable for us and leave Ontario with a severe shortage of young workers and a surplus of old cash loaded retirees that rely on the younger people to cater to their retirement. In response to this issue, the governments likely going to import vulnerable immigrants to fill the void.
Gunna be fun times
Ahahahahahahahahahahaha the clowns in here were so sure a rate hike was coming and posting doomer collapse porn. Crystal balls were hazy after all.
Like Peter lynch said, more money has been lost trying to predict interest rate changes than the effect of the actual changes. Hope people didn’t lock in some shit fixed rate after being scared by the headlines.
>Hope people didn’t lock in some shit fixed rate after being scared by the headlines.
Interest rates have been the lowest available in 30 years. Even if you locked in a fixed rate 2 months ago, you won the lottery.
Yeah we have gone through a third of our mortgage with under 2.5%. peace of mind was totally worth it. We started a family during that time, made some other big moves, it was nice knowing we didn't have to worry about our mortgage at all.
> So instead, we’re going full on Zimbabwe.
Perhaps you would like to read about the economic history of Zimbabwe a bit:
> From 1991 to 1996, the Zimbabwean ZANU–PF President Robert Mugabe embarked on an Economic Structural Adjustment Programme (ESAP) that had serious negative effects on Zimbabwe's economy. In the late 1990s, the government instituted land reforms intended to evict white landowners and place their holdings in the hands of black farmers. However, many of these "farmers" had no experience or training in farming.[12] Many farms simply fell into disrepair or were given to Mugabe loyalists. From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%.[13] Life expectancy dropped.[14] Whites fled the country en masse taking much of the nations capital. The Reserve Bank of Zimbabwe blamed the hyperinflation on economic sanctions imposed by the United States of America, the IMF and the European Union.[15][16] These sanctions affected the government of Zimbabwe,[17] asset freezes and visa denials targeted at 200 specific Zimbabweans closely tied to the Mugabe regime.[18] There were also restrictions placed on trade with Zimbabwe, by both individual businesses and the US Treasury Department's Office of Foreign Assets Control.[19]
* https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
* https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/
Completely. It's a vicious circle.
So many boomers expecting to retire off of their home equity, but soon there will be noone left to afford the homes they are trying to sell.
So if they pop the housing bubble, the younger generation might actually have a chance to build a life. But then millions of unprepared overleveraged boomers are going to lose a huge portion of their 'retirement' fund which means they'll need to keep working for another 10 years.
Guess it comes down to who votes and who doesn't.
The intent of policymakers should be to punish neither group (young Canadians looking for a chance or boomers relying on their "nest egg"), but to punish those hoarding multiple (see: 10+) properties. In theory, policymakers should have introduced capital gains, vacancy, and speculative taxes on additional properties (again, see 10+) years ago to preempt the devolution of the Canadian economy into real estate only. We have known about bubbles for decades now, and about holes in existing policy allowing for rampant speculation and "investment".
Unfortunately, policymakers have ignored the issue altogether, and have left us in such a situation that normal Canadians are screwed either way: interest rate hikes/policy corrections risk leaving seniors relying on their home for retirement without that source of income and destroys the Canadian economy, while no action leaves future generations without the option of owning a home.
And, as I'm sure people have realized, policymakers will not be collapsing the economy.
Not sure why you keep saying "boomer" this and "boomer" that. They bought their houses a long time ago and paid them off, and even with a crash will have a ton of positive equity from it/them.
It's younger generations who have bought in the past decade who will get killed by rising rates and a crash in the housing market. That's Gen-X and Millennials.
He's not referring to their original house he is referring to their 3, 4 , 5 ,6th property from the original property. Op should really be referring to slum lords though which has a higher chance to be a boomer
Boomers aren't going to be too happy when food prices skyrocket while they're on a fixed income, they don't get any grandchildren, and they're retire into an unstable economy. I guess they don't realize they're shooting themselves in the foot either way. Too bad, they almost had it made but they let greed ruin it.
Lol how many retired people get a HELOC or reverse mortgage to fund their retirement? I see the housing problem but saying people are using their house to retire is a bit strange I think.
I asked a long-time realtor and he said a bunch of people in real estate are still willing to do ninja loans (stated income with forged documents) if the buyer wants to risk it because the broker and realtor are not considered at fault.
There are for sure still stated income mortgages getting written
Canada didn't have a correction. And in fact he told me to prevent a housing crash they actually let them go wild with stated income around that time until the mid 2010's. Tons of people got into the housing market in Canada during subprime. He was giving me specific examples like a woman he knows who is on ODSP or disability and has some 6% mortgage from that time and just lives off that and heloc credit + her boyfriend.
Yeah but this will only be a problem if it's a high percentage of loans, if it's just a small amount concentrated in small areas I don't think it will impact anything in a negative way.
It just feels like big bucket of water at waterparks that is filled until it tips, excepts this bucket seems to be fucking bottomless even though it’s spilling water and tipping side to side like it’s about to tip over. The whole situation is beyond fucked.
Toronto is so central to Canada I genuinely don't see it failing. In the states there are plenty of internationally connected cities. We have like 2. I don't see the jobs migrating away fast enough to ever lower prices significantly.
Jesus Christ, the bravery in admitting to listening to a Saretzky podcast on here...
I was pleasantly surprised by that show, it's a good mix of everything.
You might like Curse of Politics, where long time Liberal insiders (in Paul Martin's staff) shoots the shit with long time Conservative insider (on Harper's staff) as they decode Canadian politics in terms of what happens on the "inside"
The one guy also does the Herle Burle podcast, where he interviews prominent Canadian politicians. He's had former PM's, BoC heads, cabinet members, etc. Asks legit questions and avoids "gotcha" BS or softball questions. I especially recommend the ones with Frances Donald if you're econ nerds.
> Curse of Politics
Thanks!
> Herle Burle podcast
I like this one.
I'll give one in return; The Empire's New Clothes.
> Is America a Declining Empire? Follow Bradford Pope McArthur as we examine the cyclical forces that make and break empires.
Not nearly as extreme as the title/description makes it out to be, he's very neutral and has some really interesting guests.
My favourite example of this was when I was a kid, Nutella (which was eaten a lot in my family those days) went up by like $2 for the jar size we used to buy - they cited “a bad hazelnut crop” that year. The price never dropped back to normal. Guess they didn’t figure out how to grow and harvest those nuts!
kirkland version uses no palm, instead coconut oil
but craft uses sunflower oil which imo is better if you're concerned about loss of jungles. sunflowers can be grown here though they often come from ukraine, turkey, or russia.
Good example! I think we can refer to todays economic forecaster Cardi B, who in her analysis of todays grocery prices said “If it’s up, then it’s stuck.”
Not sure how deep you wanted this but here's a stab at it -- there's holes and many other examples we could use, but this should give you a good idea.
Bank of Canada loans money to your bank (RBC, Scotiabank, etc..) and they do so at certain cost to them (interest rate). The Bank of Canada is known as the central bank. The RBCs, Scotiabanks, TDs may be known to you as a bank but they're also businesses. Why do people run businesses? To make money. What is one way for a bank to make money? Take the money they borrowed from the Bank of Canada and loan it you at a more expensive rate/cost than what they were charged by the Bank of Canada. Profit.
If that cost to the bank now suddenly goes up, it gets more expensive for the the RBCs, Scotiabanks and TDs to borrow money, but the RBCs, Scotiabank and TDs, as businesses, still need and want to make money and will begin charging YOU more to borrow or continuing borrowing this same money. In fact, if you aren't borrowing any money currently and become interested in doing so, they may lend you money, but not as much as they would have had the interest rates been lower. The obligations (debt repayment) of the RBCs, Scotiabanks and TDs to the Bank of Canada becomes larger, or more specifically riskier from their perspective, therefore to reduce those risks, they lend out less money.
Now let's say you are already borrowing money to pay for your home and only have $2,000 to spend every month. $1,000 of that goes towards the payment of your home (mortgage). $500 goes towards groceries, $500 for other bills. Eventually after the Bank of Canada increases the cost to the RBCs, TDs, Scotiabanks, that $1,000 that you used to pay for your home now becomes $1,200/month. But what about your groceries, credit card bills, utilities, other bills? You only have $2,000!
You now need to start cutting down on your groceries or maybe have to switch to Fido from Bell for your cellphone. Maybe you start shopping at No Frills instead of a higher end grocery store or you get those shitty Honey Nutty O's instead of the Honey Nut Cheerios as they're $1 cheaper. Alternatively, you might not buy them at all anymore as you can't afford them. Worse? You keep buying the Honey Nut Cheerios as you have standards and start not being able to pay your mortgage or credit card bills on time.
And to cover the opposite scenario if it became cheaper to live in your home as the Bank of Canada further reduced their borrowing costs to the RBC's, Scotiabanks and TDs, say $800/month rather than $1000/month, you now have $200 more to spend every month. You might decide to buy Honey Nut Cheerios more frequently now, increasing the demand for that business who now may need to hire an additional person to meticulously dab honey on every Cheerio, forcing the company to increase their price to cover that person's salary. Inflation.
Back to the $1,200/month for your home scenario now (interest rates went up) and the delicious Honey Nut Cheerios. The company that makes these is also a business. And what did we learn about businesses? They're in it to make money. If they begin realizing that fewer people are buying their product, as they may be generating fewer sales & profits, a reaction may be to start charging less for that product, at least that's the expectation. More likely they'll terminate the employee they hired in the $800/month scenario (as demand for the product is now down) or reduce the size of the packaging or even attempt to further hike the price for their dedicated fanbase who just can't get enough (wait... wrong cereal) and see where that leads.
Finally, to recap, you've most likely have seen, heard or read something about your grocery bill going up in the last couple of years. Today's announcement to not raise interest rates in a very ELI5 manner means that the Bank of Canada more or less believes that your grocery bill is going up due to circumstances outside of the ones explained above such as: strains on the supply chain, companies that make products are struggling to do so due to cargo ships not arriving on time as their captain is down with Covid. Jimmy, the truck driver that brings the Honey Nut Cheerios to your No Frills is also sick with Covid therefore can't drive it in until 10 days from now. The other truck driver, Bob, isn't sick with Covid but is taking advantage of the situation and wants to be paid $10 more per hour to bring it in; the company agrees but passes on that cost to you.
Once Jimmy recovers from Covid, the other driver Bob can go back to his regular pay and the company will be able to bring back down the cost of the Honey Nut Cheerios for you. Right? Well, to be determined.
For Every mortgage that I’ve ever had, when the interest went up, my payment stayed the same except more went towards interest rather then principal.
I was told if it reached a point where my payment kk longer covered the interest, I would accrue interest which would increase my mortgage at the end of the year.
At no point, did I run the risk of losing my home.
So when you use your 1000->1200 example, are you referring to a mortgage type I’m not familiar with?
Thx, genuinely curious.
It's already there. I'm house shopping right now and it's a fucking nightmare. 1 million plus homes in fucking OSHAWA. OSHAWA! They're not even that nice! We saw some ugly, dingy-ass semis in not so great neighborhoods that we later found out sold for like 950k to over a million. It's fucked.
It's a sad state of affairs. I'm also hunting and 3 bedroom townhouses are going over 1M in Whitby, Oshawa etc. Now I am dreading going so far out to afford something and then spending half of my life on 401 trying to get to work.
Lol my wife and I are seriously looking at bowmanville now. It's not that much cheaper but some houses are still somewhat affordable and it's a nicer area than Oshawa.
Yeah I did look at Bowmanville too. It's currently sitting at that nice 900k to 950k range. But my top ceiling is 850k although I can get approved for higher. If push comes to shove I'll have to over extend.
If you think Whitby is far, a house down from me in Innisfil just sold for 1.3M...literally TWICE what I paid 2 years ago. It's a 35foot lot. Clownworld
Just a joke. I can’t take this economy seriously anymore. It’s so obviously broken yet we keep running the same story. Pretty much the definition of insanity. We must be the most stupid species on this planet.
So yeah, they pretty much indicated that rates will be raised starting in March. How many and how often is the question, but that's always been the case with central banks.
[December 8th Press Release - Bank of Canada maintains policy rate and forward guidance]
(https://www.bankofcanada.ca/2021/12/fad-press-release-2021-12-08/)
Within the statement:
> We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.
[Today's Press Release - Bank of Canada maintains policy rate, removes exceptional forward guidance
](https://www.bankofcanada.ca/2022/01/fad-press-release-2022-01-26/)
Within the statement:
> The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound. Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target.
**These two press releases are not the same.**
Must be nice if you're a home owner. Why go to school and work hard when you can make more money each year owning a house in the GTA than a top level doctor can?
In 2015 the BoC dropped rates twice to the emergency level of 0.50% as the inflation rate was 1.5% to 1.70%, slightly below their 2% mid-point target. Now inflation is more than double their target and they refuse to increase interest rates. The BoC has lost all credibility as their only mandate directly from their website is to "keep inflation low and stable".
>CPI inflation remains well above the target range and core measures of inflation have edged up since October. Persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to 5% in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period.
This is a bit maddening. They know inflation is way above their 2-2.5% target for the whole year and still they won't raise it. It really feels they do not care about the impact on the common person.
So if it turns out to be not due to supply chain issues, they'll hike the rates like crazy?
Bet they won't. Man, fuck these governments that don't give a fuck how the average person is surviving.
This is fucking insane. They spend so much time harping on about how historically high inflation is, yet the one major tool they say they have to fight it they refuse to use. This is an emergency and they won't use the fucking fire hose. Supply chain this, supply chain that. Tell me, will the price of milk and bread decrease once these supposed supply chain issues subside? At this point my opinion is that it is just as likely not to ever decrease, because profit.
This is more evidence to possible theory that they've simply decided they don't care about inflation. As long as the money is cheap and their investment accounts increase faster than inflation, they don't give a rats ass.
But at least you can afford to live now, people making less than $21 are actually working but still underwater. Still Canada is turning into a joke of a country, we need to show our government we can't live like this any way we can.
Their data isn't showing inflation as being widespread in the economy. It's gas prices and their calculation for household depreciation (based on house prices) driving the number.
Personally, I think the data is just lagged but they'll know better when they get their business surveys back before the next meeting.
Watching all these videos and reading all these articles about how Turkey is dealing with rampant inflation, and their president wont allow the banks to raise interest rates to help slow the inflation.
Now we have the same thing here. Get me off this ride
Same. I'm just here reading. Advice on the internet, and specifically financial, can be very polarizing. You're looking for some balanced info... a lot of people who end up replying just want to tell you either everything is perfectly fine, or the sky is falling. Platitudes abound. It's why I get nervous even asking for advice on this thread sometimes, don't want to be shamed into oblivion. Admitting you don't know everything is a lot easier than people on these threads would have you believe.
"This is the WORST thing to EVER happen to the economy, it's like they don't even CARE. HOLY FUCK cat toys and salad dressing have gone up 500%!!! I'm just going to circle JERK into this internet ECHO CHAMBER about how this country is literally COLLAPSING and just get angrier and angrier!!!!
This is a sell signal for those with HELOCS. A 8 week opportunity window to get out of debt, congrats. Whether or not people are smart enough to take the opportunity is another story.
It's interesting how there's two entirely different groups in this comments section. The ones who are making bank off the upcoming generation, massive wealth they didn't work for, and the rest who are utterly fucked and will never own anything unless they pay a ridiculous amount for it and never retire. Happy for the ones making bank I guess
"In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected"
\---- No shit, this growth includes the enormous inflation numbers. They should be looking at Real GDP...
Let's keep selling each other houses. Each transaction increases GDP without any tangible economic benefit. You sell me your house for $1.5M and GDP just increased by $1.5M.
What a joke our government has become.
/u/Baraxton and /u/ValerianR00t...you guys just reminded me of this:
>
>
>Two economists are walking through the woods...
The First Economist says to the Second Economist, "I'll pay you $100 to
eat that pile of bear shit". The Second economist does and they continue
their walk. They walk past another pile of bear shit and the Second
Economist says to the First Economist, "I'll pay you $100 to eat that
pile of bear shit". The First Economist does and they continue their
walk. The First Economist then says, "I cannot help to think we both
just ate bear shit for nothing". The Second Economist replies, "well not
quite nothing, we did cause the GDP to grow by $200".
Excuse my language - but what the **FUCK**??? The BoC literally admits that inflation is much higher than their older forecasts (~4% for 2022!), minimal economic slack, labour market is on track, business investment expected to bounce back, Q4 GDP was better than their expectations...and rates stay as is? This is criminal.
Several factors at play. Omicron, for one. The US rate isn't going up till March so if we raise now then exports will be more expensive (CAD goes up), hurting businesses. But yeah, in the meantime expect housing to keep going up
Surprising decision. I think it will be interesting to see what the landscape looks like in March, and whether the BOC finds itself so far behind the 8-ball on inflation that they need to look at 50bp increment moves.
In the consumer goods world, retailers will not accept price increases without a lengthy notice period, usually something like 90 days for the big guys. There are A LOT of pending price increases coming on a wide range of goods that will be hitting store shelves in the coming months.
I think today's decision will actually increase the risk that the BoC will need to ramp up their policy response at a later date, and actually risk over-tightening by the time they are done.
Finally the west is catching up with the economic theories of the supreme leader Erdogan of Turkey. But keeping the interest rates isn’t enough, they should start lowering it and then the inflation will follow the same course and decrease.
It's really not funny though; That economic policy has robbed some people's hope for the future to such an extreme extent that suicide is seeming like a viable option.
And then they're surprised when the other side cheers for a devastating crash? That's the problem with a polarized society. There doesn't have to be winners and losers. There's enough resources for us to all be doing fine.
As a non-homeowner I don't have any issue with people who've bought recently. I hope if there ever is a market downturn they can weather it successfully. Its the greedy flippers, investors, and slumlords that are stepping over others on their way to the top that I want to fail.
Not one to laugh as I worry for my kids and I will never upgrade
But they tend to deathride people like me and my pregnant wife who moved into a condo townhouse with variable rates
The rich get richer. This government is next level stupid. Goodbye housing for young people. It’s ok, just replace them with more immigration and low wages.
While I agree with the sentiment in the thread, there are reasons why BoC may have chosen to keep the rates as is for now.
Housing issues I agree with, as an ex-mortgage specialist people are just going ham on mortgage applications, but do also note that spreads are becoming more expensive and it is actually more expensive to lend despite rates not changing.
As for everyday spending like groceries, restaurants, etc., yes prices are going up, but there are a few reasons:
1) Increasing wages. We all want higher min wages to match the prices, which yes makes complete sense (I'm no baller myself working an 8-5 job), but we must have foresaw higher prices following these higher wages as well right?
2) Supply chains. Simple econ 101, we have issues (decrease) in supply, while our demand remains same if not higher because people love hoarding during covid, and therefore prices rise.
3) Negative feedback loop. Let's say for eg, restaurants are a (relatively) low margin business. Even a small rise in cost of business impacts these businesses greatly. As per above, prices in labour and groceries both went up. Not to mention Ubereats and Doordash or whatever cuts into that as well. Result? Prices of food goes up. What happens then? People say screw this, I'm gonna cook myself. They lose business, and they choose to either cut costs, or increase prices. Some choose the latter, which deters customers, losing profits, and the cycle repeats until they shut down. As for groceries, well now you're driving up demand in your local grocery store, pushing prices further higher as well.
Unfortunately, higher interest rates isn't going to solve any of the above right now. It technically only solves the housing crisis, which tbh, my proposal is to make it much harder to qualify or buy a second property. I personally think housing prices are so high because the rich can afford a 2nd, 3rd property, while everyday families can barely afford one. Decrease the demand on houses, and hopefully this can help both immigrants who don't have a house yet, or new house buyers afford one, while those who already have a house find another avenue to invest.
I'm no econ major or anything, just a reddit lurker who works in finance and grew up in Vancouver BC to immigrant parents. So please feel free to downvote me or discuss with me but these are my personal opinions.
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# ImNotFuckinLeaving!
#*This is my home*. THEY'RE GONNA NEED A FUCKING WRECKING BALL TO TAKE ME OUT OF HERE.
I am, if I can land a US job lol
Work remote for a US company, if you can. Best of both worlds.
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Come live the American dream… in Canada.
Yuuuup tyvm for the 18% raise this year and 20% annual income as bonus. Love US businesses
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So you're telling me *it gets worse* from here? Lovely.
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> **The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.** What does that even mean?
I think it means they want to avoid people perceiving that there will be chronically high inflation because the psychology of the average person can contribute to it. The problem with that is that they didn't dare raise the interest rate even a quarter of a point in response to multi-decade high inflation so that fear is actually justified.
> The problem with that is that they didn't dare raise the interest rate even a quarter of a point in response to multi-decade high inflation so that fear is actually justified. You're spot on, I find this absolutely terrifying. Are we really so afraid of making debt just a little bit more expensive with our current economic conditions? Why?
because we're all technically "indebted" to our "owners". forever. that's what inflation truly is. it only effects some people. those affected by inflation are owned.
>because we're all technically "indebted" to our "owners". forever. that's what inflation truly is. it only effects some people. those affected by inflation are owned. Bolshevik revolution affected everybody.
The recent market drop also has them spooked
~10% market drop usually isn't the time to increase rates. Inflation is very tied to perception. If people think cars are going to be more expensive next year, they will buy a car this year, increasing demand, increasing price. Anecdotally, I know a few people who are holding out for a new car for when supply increases and they have more choice, indicating that the public still believes that it's transitory supply constraints. That's a good thing. On the housing side it does seem like people are trying to get in before it goes up more. Once again supply is the lowest in recent times, indicating that it's also a supply issue and everyone seems to be holding onto what they have.
I disagree Let the rate rise and market drop. It will unwind and fix itself in time. Build a house on a shitty foundation and it's going to come to roost. Better start fixing it now. If our economy is so precarious that 0.25% rise causes the BoC to pause, we are in a world of trouble. Agree with your other points though, well said.
"Build a house on a shitty foundation and it's going to come home to roost". Excellent malaphor.
It’s not just current owners holding, it’s the lack of new build and new construction. Even with supply chain shortages causing delayed construction, even under the best circumstances there will be still shortages going forward. I’m honestly not sure how anything changes in housing in heavy areas like TO or Vancouver. Interest rates aren’t going to change demand enough to make up for the shortages we have on the build side of the equation
I agree. And supply of housing needs years of lead time because of all the zoning and permitting. Vancouver takes 2-3 years just to do the rezoning and permit approval of modest project, with a year or two before and after that for design and construction. It's a slow moving beast.
And that’s assuming you have a compliant municipal government. Many, many places do not. The amount of NIMBYism that slows housing projects is major issue in and of itself. There is no magic bullet for this. We are in for a long and slow and painful housing fix if any government wants to even focus on it
Inflation begets more inflation. People hoarding...wage pressures...they will have to stomp it out at some point. Why wouldn't I buy all the canned goods in the store if I expected them to be 10% more expensive next year? If everyone did that they'd be 200% more expensive next year.
> Why wouldn't I buy all the canned goods in the store if I expected them to be 10% more expensive next year? This is the part where living in a tiny condo sucks lol. I don't even have a damn pantry.
They'll do nothing but pray inflation doesn't go higher
We did nothing and we're dissapointed it didn't work - BOC
Also, 'We've tried nothing and we're all out of ideas.'
>> expectations do not become embedded in ongoing inflation. > > What does that even mean? It's a bit of psychology in how people perceive current prices and how they think prices will be in the future: > Built-in inflation is induced by adaptive expectations, and is often linked to the "price/wage spiral". It involves workers trying to keep their wages up with prices (above the rate of inflation), and firms passing these higher labor costs on to their customers as higher prices, leading to a feedback loop. Built-in inflation reflects events in the past, and so might be seen as hangover inflation. * https://en.wikipedia.org/wiki/Inflation#Keynesian_view > Inflationary expectations play a role because if workers and employers expect inflation to persist in the future, they will increase their (nominal) wages and prices now. (See real vs. nominal in economics.) This means that inflation happens now simply because of subjective views about what may happen in the future. Following the generally accepted theory of adaptive expectations, such inflationary expectations arise because of persistent past experience with inflation. * https://en.wikipedia.org/wiki/Built-in_inflation Inflation becomes a self-fulfilling prophecy.
They still plan on raising interest rates and doing quantitative tightening. There mandate is also regarding ongoing inflation (2 year outlook), not just near term inflation spikes. Also, rate hikes don't have much of an effect on near term inflation.
It sounds like they're trying to tackle inflation caused by COVID immediately and ease back into "regular" long-term inflation.
How is it that Switzerland has an inflation rate under 1% but the Eurozone has an inflation rate of 5% if it's being caused by "supply chain issues"? There are always supply chain issues.
> There are always supply chain issues. Our response to COVID19 has had the greatest impact on our supply chain in our lifetimes. You can't hand wave the impact of supply chain management these past two years as "there are always supply chain issues." The impact is massive... the demand has not been greater than prepandemic, but the supply has been much shorter. Interest rates don't do diddly squat to resolve global supply chain issues, it just curbs some demand of elastic goods. The implication of increasing the cost of borrowing will somehow reduce the prices of housing and food is that we are fine with homelessness and starvation to resolve inflation. You can't hide from reckless spending and shut down economies over a virus and expect that costs won't eventually come up. Spreading the costs over time is like slowly ripping off a bandage.
Housing prices go lower when borrowing costs higher
There are not always supply chain issues. 2020- now have been the worst in more than a decade. With manufacturing plants shutting down due to COVID. Floods in BC, closing down rail lines. Protests on rail lines in Mar 2020. Chinese plants shutting down for over a month extra after chinese New Year in 2020 due to COVID. Chinese Ports shutting down due to COVID and then causing month long congestion. That isn't standard
Maybe because the Swiss don't buy much locally and do most of their shopping cross border? This is a complete shot in the dark and based on little to no research to back this claim. I am hoping by saying something wrong someone smarter can quickly provide the real answer.
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I just read this as “we hold assets in this inflated market and don’t wait interest hikes to cause a decrease in value of assets”. No, they don’t give a shit about the average Joe. We’ve been over due for a recession for years now. I guess they will keep it artificially inflated with more money printing and cheap debt. They will just have to keep giving us more debt to even keep the economy functional at this point. What a bunch of idiots we got running this circus. The longer this goes on, the more suffering that will happen when the bubble pops. I work in supply chain. Yes it is a big factor for inflation. Not the only one though. Inflation wouldn’t go down to 3% if you solved every supply chain issue today. They are just giving lip service to make us feel like they actually give a shit. They won’t have a working class if they keep this up.
Surprised oil and home depreciation was not mentioned: > This product-level information matters. Knowing what their prices are and their importance for the average consumer, we can decompose what’s driving the overall 4.8 percent inflation rate. I do this below and the results are both surprising and important: recent increases are driven mainly by gasoline and the depreciation of our homes (or, in StatCan’s wording, “homeowners’ replacement costs”). > > Combined, they account for roughly 9 percent of the overall basket of goods and services in the consumer price index. But—and this is the surprising part—they account for a clear majority of the increase in measured inflation recently. Let that sink in. > > Had just these two specific items not increased in price over the past year, Canada’s inflation rate would have been close to normal. With just two items driving the overall average, it’s worth understanding what’s going on with each. * https://thehub.ca/2022-01-25/making-sense-of-high-inflation-in-canada/ The general public freaks out over the headline number, but it's worth digging into the details.
Yay! Buy more houses!
It is ridiculous, when I started looking for houses in our preferred area they were 1 million for a nice, newish detached. By the time we bid and lost, they were already at 1.4. We panicked and bought a detached strata house for 1.2M, now the same strata houses are selling for 1.35M, detached are selling for 1.5M. I don't care about the increasing property value, we are here to live long term and not make profit. I am not sure how the younger generation is going to afford a house. Heck, I don't even mind my property value going down so that people can afford it.
> I am not sure how the younger generation is going to afford a house. They're not. It's flat-out impossible right now. Carrying costs may be low(er) due to low mortgage rates, but the downpayment is impossible to save for. If you don't have family helping you buy, you don't buy.
Downpayment take like 10-15 year to accumulate now. F
Theyll all move away then all the old ppl living in their nice $10 mill homes in 2050 GTA will have a labor shortage issue
As far as we know, immigration rates are set to be all time highs in the coming decades, so no big issue there.
And where are they supposed to live? I'm guessing anyone with the money to afford those real estate prices isn't going to be working in the lower paid labor pool.
All those empty apartments owned by foreigners will be occupied by a family of 10.
Come back in spring to see your house at 1.8million.
We (The younger generation) don’t buy houses here. We move away to places where it’s affordable for us and leave Ontario with a severe shortage of young workers and a surplus of old cash loaded retirees that rely on the younger people to cater to their retirement. In response to this issue, the governments likely going to import vulnerable immigrants to fill the void. Gunna be fun times
> I am not sure how the younger generation is going to afford a house By moving to the states and leaving you holding the bag
Yeah at some point Canada is just gonna be 10 guys playing musical chairs with their 10 multimillion dollar homes with no production or food.
Ahahahahahahahahahahaha the clowns in here were so sure a rate hike was coming and posting doomer collapse porn. Crystal balls were hazy after all. Like Peter lynch said, more money has been lost trying to predict interest rate changes than the effect of the actual changes. Hope people didn’t lock in some shit fixed rate after being scared by the headlines.
>Hope people didn’t lock in some shit fixed rate after being scared by the headlines. Interest rates have been the lowest available in 30 years. Even if you locked in a fixed rate 2 months ago, you won the lottery.
My fixed rate from this summer is at a whopping 1.6%. Lol too bad I couldn't lock in for 20 years.
Closed a few weeks ago 1.99% fixed. Peace of mind for 5 years be worth
Yeah we have gone through a third of our mortgage with under 2.5%. peace of mind was totally worth it. We started a family during that time, made some other big moves, it was nice knowing we didn't have to worry about our mortgage at all.
We will always be 6 months away from an interest rate hike.
they predicted 6 hikes for this year alone. well we are only in the first month of 2022, so the doomers might still be right.
Why are rate hikes a doomer idea? They are necessary to have a balanced functioning financial system.
But not today.
“What do we say to the goddess of high interest rates”? “Not today”
> the clowns in here you mean the peopple who can do math and thus know this situation is not sustainable?
The markets were pricing in a rate hike, so it's also the "smart" money who were betting on it. But sure shit on the retail investors.
So instead, we’re going full on Zimbabwe. Got it.
> So instead, we’re going full on Zimbabwe. Perhaps you would like to read about the economic history of Zimbabwe a bit: > From 1991 to 1996, the Zimbabwean ZANU–PF President Robert Mugabe embarked on an Economic Structural Adjustment Programme (ESAP) that had serious negative effects on Zimbabwe's economy. In the late 1990s, the government instituted land reforms intended to evict white landowners and place their holdings in the hands of black farmers. However, many of these "farmers" had no experience or training in farming.[12] Many farms simply fell into disrepair or were given to Mugabe loyalists. From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%.[13] Life expectancy dropped.[14] Whites fled the country en masse taking much of the nations capital. The Reserve Bank of Zimbabwe blamed the hyperinflation on economic sanctions imposed by the United States of America, the IMF and the European Union.[15][16] These sanctions affected the government of Zimbabwe,[17] asset freezes and visa denials targeted at 200 specific Zimbabweans closely tied to the Mugabe regime.[18] There were also restrictions placed on trade with Zimbabwe, by both individual businesses and the US Treasury Department's Office of Foreign Assets Control.[19] * https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe * https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/
Don’t wanna pop the housing bubble. Instead let the poor who don’t own homes handle inflation
Completely. It's a vicious circle. So many boomers expecting to retire off of their home equity, but soon there will be noone left to afford the homes they are trying to sell. So if they pop the housing bubble, the younger generation might actually have a chance to build a life. But then millions of unprepared overleveraged boomers are going to lose a huge portion of their 'retirement' fund which means they'll need to keep working for another 10 years. Guess it comes down to who votes and who doesn't.
The intent of policymakers should be to punish neither group (young Canadians looking for a chance or boomers relying on their "nest egg"), but to punish those hoarding multiple (see: 10+) properties. In theory, policymakers should have introduced capital gains, vacancy, and speculative taxes on additional properties (again, see 10+) years ago to preempt the devolution of the Canadian economy into real estate only. We have known about bubbles for decades now, and about holes in existing policy allowing for rampant speculation and "investment". Unfortunately, policymakers have ignored the issue altogether, and have left us in such a situation that normal Canadians are screwed either way: interest rate hikes/policy corrections risk leaving seniors relying on their home for retirement without that source of income and destroys the Canadian economy, while no action leaves future generations without the option of owning a home. And, as I'm sure people have realized, policymakers will not be collapsing the economy.
Not sure why you keep saying "boomer" this and "boomer" that. They bought their houses a long time ago and paid them off, and even with a crash will have a ton of positive equity from it/them. It's younger generations who have bought in the past decade who will get killed by rising rates and a crash in the housing market. That's Gen-X and Millennials.
He's not referring to their original house he is referring to their 3, 4 , 5 ,6th property from the original property. Op should really be referring to slum lords though which has a higher chance to be a boomer
Boomers aren't going to be too happy when food prices skyrocket while they're on a fixed income, they don't get any grandchildren, and they're retire into an unstable economy. I guess they don't realize they're shooting themselves in the foot either way. Too bad, they almost had it made but they let greed ruin it.
How does someone retire off home equity? Few people sell their houses at retirement.
HELOC/Reverse Mortgage.
Lol how many retired people get a HELOC or reverse mortgage to fund their retirement? I see the housing problem but saying people are using their house to retire is a bit strange I think.
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Canada housing bubble became too big to fail.
I asked a long-time realtor and he said a bunch of people in real estate are still willing to do ninja loans (stated income with forged documents) if the buyer wants to risk it because the broker and realtor are not considered at fault. There are for sure still stated income mortgages getting written
So nothing was learned from 2008
Canada didn't have a correction. And in fact he told me to prevent a housing crash they actually let them go wild with stated income around that time until the mid 2010's. Tons of people got into the housing market in Canada during subprime. He was giving me specific examples like a woman he knows who is on ODSP or disability and has some 6% mortgage from that time and just lives off that and heloc credit + her boyfriend.
Yeah but this will only be a problem if it's a high percentage of loans, if it's just a small amount concentrated in small areas I don't think it will impact anything in a negative way.
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My neighbour back in 2005 thought I was insane buying the house I did back then as he expected prices to collapse any moment.
This euphoria is extremely off-putting to me and signals to stay away from real estate.
It just feels like big bucket of water at waterparks that is filled until it tips, excepts this bucket seems to be fucking bottomless even though it’s spilling water and tipping side to side like it’s about to tip over. The whole situation is beyond fucked.
It's not euphoria when housing is treated more like a commodity in Canada
Toronto is so central to Canada I genuinely don't see it failing. In the states there are plenty of internationally connected cities. We have like 2. I don't see the jobs migrating away fast enough to ever lower prices significantly.
No shit. And seeing this more people are piling in. By all accounts the spring market barely started and is already completely insane here in Toronto.
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Jesus Christ, the bravery in admitting to listening to a Saretzky podcast on here... I was pleasantly surprised by that show, it's a good mix of everything.
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Agreed I think it’s a good show, I wish there were more like it with Canadian content.
You might like Curse of Politics, where long time Liberal insiders (in Paul Martin's staff) shoots the shit with long time Conservative insider (on Harper's staff) as they decode Canadian politics in terms of what happens on the "inside" The one guy also does the Herle Burle podcast, where he interviews prominent Canadian politicians. He's had former PM's, BoC heads, cabinet members, etc. Asks legit questions and avoids "gotcha" BS or softball questions. I especially recommend the ones with Frances Donald if you're econ nerds.
> Curse of Politics Thanks! > Herle Burle podcast I like this one. I'll give one in return; The Empire's New Clothes. > Is America a Declining Empire? Follow Bradford Pope McArthur as we examine the cyclical forces that make and break empires. Not nearly as extreme as the title/description makes it out to be, he's very neutral and has some really interesting guests.
I think the term he used that the BoC lacks is "testicular fortitude" To PFC gang: Down vote me lol. I don't care.
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Inflation is over, good news everyone!!
So the increase in my food bill is not inflation. Good to know it's really price gouging from the store....
My favourite example of this was when I was a kid, Nutella (which was eaten a lot in my family those days) went up by like $2 for the jar size we used to buy - they cited “a bad hazelnut crop” that year. The price never dropped back to normal. Guess they didn’t figure out how to grow and harvest those nuts!
And there aren't even that many hazelnuts in Nutella. It's basically oil and sugar
Palm oil, too. Poor orangutans
The Kraft version is palm oil free, and tastes equally as good in my opinion
kraft "low" sugar version is the best tasting of all of the hazelnut spreads
kirkland version uses no palm, instead coconut oil but craft uses sunflower oil which imo is better if you're concerned about loss of jungles. sunflowers can be grown here though they often come from ukraine, turkey, or russia.
I know - not as good as it once was, or maybe my palate has matured.
Good example! I think we can refer to todays economic forecaster Cardi B, who in her analysis of todays grocery prices said “If it’s up, then it’s stuck.”
Phew I was worried for a second there
Can someone ELI5 what’s the commotion about this?
Not sure how deep you wanted this but here's a stab at it -- there's holes and many other examples we could use, but this should give you a good idea. Bank of Canada loans money to your bank (RBC, Scotiabank, etc..) and they do so at certain cost to them (interest rate). The Bank of Canada is known as the central bank. The RBCs, Scotiabanks, TDs may be known to you as a bank but they're also businesses. Why do people run businesses? To make money. What is one way for a bank to make money? Take the money they borrowed from the Bank of Canada and loan it you at a more expensive rate/cost than what they were charged by the Bank of Canada. Profit. If that cost to the bank now suddenly goes up, it gets more expensive for the the RBCs, Scotiabanks and TDs to borrow money, but the RBCs, Scotiabank and TDs, as businesses, still need and want to make money and will begin charging YOU more to borrow or continuing borrowing this same money. In fact, if you aren't borrowing any money currently and become interested in doing so, they may lend you money, but not as much as they would have had the interest rates been lower. The obligations (debt repayment) of the RBCs, Scotiabanks and TDs to the Bank of Canada becomes larger, or more specifically riskier from their perspective, therefore to reduce those risks, they lend out less money. Now let's say you are already borrowing money to pay for your home and only have $2,000 to spend every month. $1,000 of that goes towards the payment of your home (mortgage). $500 goes towards groceries, $500 for other bills. Eventually after the Bank of Canada increases the cost to the RBCs, TDs, Scotiabanks, that $1,000 that you used to pay for your home now becomes $1,200/month. But what about your groceries, credit card bills, utilities, other bills? You only have $2,000! You now need to start cutting down on your groceries or maybe have to switch to Fido from Bell for your cellphone. Maybe you start shopping at No Frills instead of a higher end grocery store or you get those shitty Honey Nutty O's instead of the Honey Nut Cheerios as they're $1 cheaper. Alternatively, you might not buy them at all anymore as you can't afford them. Worse? You keep buying the Honey Nut Cheerios as you have standards and start not being able to pay your mortgage or credit card bills on time. And to cover the opposite scenario if it became cheaper to live in your home as the Bank of Canada further reduced their borrowing costs to the RBC's, Scotiabanks and TDs, say $800/month rather than $1000/month, you now have $200 more to spend every month. You might decide to buy Honey Nut Cheerios more frequently now, increasing the demand for that business who now may need to hire an additional person to meticulously dab honey on every Cheerio, forcing the company to increase their price to cover that person's salary. Inflation. Back to the $1,200/month for your home scenario now (interest rates went up) and the delicious Honey Nut Cheerios. The company that makes these is also a business. And what did we learn about businesses? They're in it to make money. If they begin realizing that fewer people are buying their product, as they may be generating fewer sales & profits, a reaction may be to start charging less for that product, at least that's the expectation. More likely they'll terminate the employee they hired in the $800/month scenario (as demand for the product is now down) or reduce the size of the packaging or even attempt to further hike the price for their dedicated fanbase who just can't get enough (wait... wrong cereal) and see where that leads. Finally, to recap, you've most likely have seen, heard or read something about your grocery bill going up in the last couple of years. Today's announcement to not raise interest rates in a very ELI5 manner means that the Bank of Canada more or less believes that your grocery bill is going up due to circumstances outside of the ones explained above such as: strains on the supply chain, companies that make products are struggling to do so due to cargo ships not arriving on time as their captain is down with Covid. Jimmy, the truck driver that brings the Honey Nut Cheerios to your No Frills is also sick with Covid therefore can't drive it in until 10 days from now. The other truck driver, Bob, isn't sick with Covid but is taking advantage of the situation and wants to be paid $10 more per hour to bring it in; the company agrees but passes on that cost to you. Once Jimmy recovers from Covid, the other driver Bob can go back to his regular pay and the company will be able to bring back down the cost of the Honey Nut Cheerios for you. Right? Well, to be determined.
For Every mortgage that I’ve ever had, when the interest went up, my payment stayed the same except more went towards interest rather then principal. I was told if it reached a point where my payment kk longer covered the interest, I would accrue interest which would increase my mortgage at the end of the year. At no point, did I run the risk of losing my home. So when you use your 1000->1200 example, are you referring to a mortgage type I’m not familiar with? Thx, genuinely curious.
Not the poster but some mortgages with variable interest do operate where if interest goes up you immediately see an adjustment in what you pay.
Thanks for this explanation
What a complete joke. Get ready for 1 mili average house prices
It's already there. I'm house shopping right now and it's a fucking nightmare. 1 million plus homes in fucking OSHAWA. OSHAWA! They're not even that nice! We saw some ugly, dingy-ass semis in not so great neighborhoods that we later found out sold for like 950k to over a million. It's fucked.
It's a sad state of affairs. I'm also hunting and 3 bedroom townhouses are going over 1M in Whitby, Oshawa etc. Now I am dreading going so far out to afford something and then spending half of my life on 401 trying to get to work.
Lol my wife and I are seriously looking at bowmanville now. It's not that much cheaper but some houses are still somewhat affordable and it's a nicer area than Oshawa.
Yeah I did look at Bowmanville too. It's currently sitting at that nice 900k to 950k range. But my top ceiling is 850k although I can get approved for higher. If push comes to shove I'll have to over extend.
If you think Whitby is far, a house down from me in Innisfil just sold for 1.3M...literally TWICE what I paid 2 years ago. It's a 35foot lot. Clownworld
Just a joke. I can’t take this economy seriously anymore. It’s so obviously broken yet we keep running the same story. Pretty much the definition of insanity. We must be the most stupid species on this planet.
$1M in Oshawa? Good grief.
If you think that's high, even Bowmanville and Clarington East of Oshawa are getting to $1M now
LOL I probably couldn't even find those towns on a map.
Remember when we were kids and a million was an unfathomable amount of money? That was rich people mansion money.
♫♪𝄞 if I had a million dollars... if I had a million dollars... I would buy you a modest townhouse in Whitby and I'd be rich! ♫♪𝄞)
Dude, in GTA, even 1 bedroom condos are approaching $1M prices. Saw a 1+1 near subway sold the other day for $960k.
We already reached there.
Moaaaaar inflation for everybody!
So yeah, they pretty much indicated that rates will be raised starting in March. How many and how often is the question, but that's always been the case with central banks.
Too few and too infrequently is for sure the answer based on the last couple decades.
They pretty much indicated rates would rise in January at their last meeting. I'll believe it when I see it
[December 8th Press Release - Bank of Canada maintains policy rate and forward guidance] (https://www.bankofcanada.ca/2021/12/fad-press-release-2021-12-08/) Within the statement: > We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. [Today's Press Release - Bank of Canada maintains policy rate, removes exceptional forward guidance ](https://www.bankofcanada.ca/2022/01/fad-press-release-2022-01-26/) Within the statement: > The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound. Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target. **These two press releases are not the same.**
Must be nice if you're a home owner. Why go to school and work hard when you can make more money each year owning a house in the GTA than a top level doctor can?
In 2015 the BoC dropped rates twice to the emergency level of 0.50% as the inflation rate was 1.5% to 1.70%, slightly below their 2% mid-point target. Now inflation is more than double their target and they refuse to increase interest rates. The BoC has lost all credibility as their only mandate directly from their website is to "keep inflation low and stable".
Trash move BoC.
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>CPI inflation remains well above the target range and core measures of inflation have edged up since October. Persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to 5% in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period. This is a bit maddening. They know inflation is way above their 2-2.5% target for the whole year and still they won't raise it. It really feels they do not care about the impact on the common person.
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So if it turns out to be not due to supply chain issues, they'll hike the rates like crazy? Bet they won't. Man, fuck these governments that don't give a fuck how the average person is surviving.
This is fucking insane. They spend so much time harping on about how historically high inflation is, yet the one major tool they say they have to fight it they refuse to use. This is an emergency and they won't use the fucking fire hose. Supply chain this, supply chain that. Tell me, will the price of milk and bread decrease once these supposed supply chain issues subside? At this point my opinion is that it is just as likely not to ever decrease, because profit. This is more evidence to possible theory that they've simply decided they don't care about inflation. As long as the money is cheap and their investment accounts increase faster than inflation, they don't give a rats ass.
Seriously anybody making less than $21 an hour should go on strike, but knowing Canada they'll be replaced by immigrant slaves.
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But at least you can afford to live now, people making less than $21 are actually working but still underwater. Still Canada is turning into a joke of a country, we need to show our government we can't live like this any way we can.
I make $24, 30 hours a week + side gigs... I'm changing my whole life this year because what I'm currently doing has quickly become not even workable.
Their data isn't showing inflation as being widespread in the economy. It's gas prices and their calculation for household depreciation (based on house prices) driving the number. Personally, I think the data is just lagged but they'll know better when they get their business surveys back before the next meeting.
Time to bring out the pitchforks.
Dammit...I only brought torches!
Watching all these videos and reading all these articles about how Turkey is dealing with rampant inflation, and their president wont allow the banks to raise interest rates to help slow the inflation. Now we have the same thing here. Get me off this ride
Already loving some of the reddit economist hot takes
Same. I'm just here reading. Advice on the internet, and specifically financial, can be very polarizing. You're looking for some balanced info... a lot of people who end up replying just want to tell you either everything is perfectly fine, or the sky is falling. Platitudes abound. It's why I get nervous even asking for advice on this thread sometimes, don't want to be shamed into oblivion. Admitting you don't know everything is a lot easier than people on these threads would have you believe.
"This is the WORST thing to EVER happen to the economy, it's like they don't even CARE. HOLY FUCK cat toys and salad dressing have gone up 500%!!! I'm just going to circle JERK into this internet ECHO CHAMBER about how this country is literally COLLAPSING and just get angrier and angrier!!!!
This is a sell signal for those with HELOCS. A 8 week opportunity window to get out of debt, congrats. Whether or not people are smart enough to take the opportunity is another story.
This could be the case. They are giving a signal to non-delusional people to deleverage before pulling the rug.
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Hopefully everyone bought the dip, stocks going to the moon today! Except the moon is where your portfolio was a week ago.
Still got the Fed decision this afternoon.
It's interesting how there's two entirely different groups in this comments section. The ones who are making bank off the upcoming generation, massive wealth they didn't work for, and the rest who are utterly fucked and will never own anything unless they pay a ridiculous amount for it and never retire. Happy for the ones making bank I guess
cowards, all talk no action
"In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected" \---- No shit, this growth includes the enormous inflation numbers. They should be looking at Real GDP...
Let's keep selling each other houses. Each transaction increases GDP without any tangible economic benefit. You sell me your house for $1.5M and GDP just increased by $1.5M. What a joke our government has become.
/u/Baraxton and /u/ValerianR00t...you guys just reminded me of this: > > >Two economists are walking through the woods... The First Economist says to the Second Economist, "I'll pay you $100 to eat that pile of bear shit". The Second economist does and they continue their walk. They walk past another pile of bear shit and the Second Economist says to the First Economist, "I'll pay you $100 to eat that pile of bear shit". The First Economist does and they continue their walk. The First Economist then says, "I cannot help to think we both just ate bear shit for nothing". The Second Economist replies, "well not quite nothing, we did cause the GDP to grow by $200".
Haha I love the joke. I know a different variation of it, but it always gets good laughs in finance/economics circles.
Thats not how GDP calculation works
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Not just devastating for low income Canadians, devastating for mid income Canadians who don’t own a home
Or their kids. Guess I'll just live with my parents and brother forever.
People are making 200-400k tax free in a few months. It's insanity right now...
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Yours or 19 year old daughter. No shortage of fraud going on in GTA lol...
Friend of mine bought in fucking *Janetville* ON and has made 500k in the houses value over the last two years
Or put differently, over a decade worth of minimum wage work.
there will be 50% increase in house price this year.
Excuse my language - but what the **FUCK**??? The BoC literally admits that inflation is much higher than their older forecasts (~4% for 2022!), minimal economic slack, labour market is on track, business investment expected to bounce back, Q4 GDP was better than their expectations...and rates stay as is? This is criminal.
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Several factors at play. Omicron, for one. The US rate isn't going up till March so if we raise now then exports will be more expensive (CAD goes up), hurting businesses. But yeah, in the meantime expect housing to keep going up
Can someone EILI5 how someone with say $100,000 in cash can benefit from the current financial situation?
Bought 100k worth of Dow or sp500 index yesterday
Buy some reit? Idk l have same question actually
Surprising decision. I think it will be interesting to see what the landscape looks like in March, and whether the BOC finds itself so far behind the 8-ball on inflation that they need to look at 50bp increment moves. In the consumer goods world, retailers will not accept price increases without a lengthy notice period, usually something like 90 days for the big guys. There are A LOT of pending price increases coming on a wide range of goods that will be hitting store shelves in the coming months. I think today's decision will actually increase the risk that the BoC will need to ramp up their policy response at a later date, and actually risk over-tightening by the time they are done.
Finally the west is catching up with the economic theories of the supreme leader Erdogan of Turkey. But keeping the interest rates isn’t enough, they should start lowering it and then the inflation will follow the same course and decrease.
What's funny is Turkey's negative real rates are the same as America's negative real rates but Turkey gets shorted and America is a safe haven
r/canadahousing on suicide watch
It's really not funny though; That economic policy has robbed some people's hope for the future to such an extreme extent that suicide is seeming like a viable option.
We've got a society where some homeowners gleefully laugh at people who are having a hard time.
And then they're surprised when the other side cheers for a devastating crash? That's the problem with a polarized society. There doesn't have to be winners and losers. There's enough resources for us to all be doing fine. As a non-homeowner I don't have any issue with people who've bought recently. I hope if there ever is a market downturn they can weather it successfully. Its the greedy flippers, investors, and slumlords that are stepping over others on their way to the top that I want to fail.
Not one to laugh as I worry for my kids and I will never upgrade But they tend to deathride people like me and my pregnant wife who moved into a condo townhouse with variable rates
BoC has effectively lost all credibility. The average Canadian no longer feels as if they have their best interests at heart.
The rich get richer. This government is next level stupid. Goodbye housing for young people. It’s ok, just replace them with more immigration and low wages.
That has always been the plan. The Great Canadian Ponzi Scheme and race to the bottom economics.
Fixed rate ppl b mad
At 1.1 variable, not going to change to fixed even if they raise 1%.
Everyone literally everyone, even the banks were asking for the damn increase. Why no increase?
« Even the banks » ah yes, the holders of trillions in variable rate mortgages want rate increases, I wonder why
Wtf… 3% inflation? What metrics are they using here? This has got to be complete BS no?
They forecast headline inflation will be 5% inflation over the first half of the year. Forecasting 3% towards the end of the year.
Cowards! lol
BoC is big dum dum
While I agree with the sentiment in the thread, there are reasons why BoC may have chosen to keep the rates as is for now. Housing issues I agree with, as an ex-mortgage specialist people are just going ham on mortgage applications, but do also note that spreads are becoming more expensive and it is actually more expensive to lend despite rates not changing. As for everyday spending like groceries, restaurants, etc., yes prices are going up, but there are a few reasons: 1) Increasing wages. We all want higher min wages to match the prices, which yes makes complete sense (I'm no baller myself working an 8-5 job), but we must have foresaw higher prices following these higher wages as well right? 2) Supply chains. Simple econ 101, we have issues (decrease) in supply, while our demand remains same if not higher because people love hoarding during covid, and therefore prices rise. 3) Negative feedback loop. Let's say for eg, restaurants are a (relatively) low margin business. Even a small rise in cost of business impacts these businesses greatly. As per above, prices in labour and groceries both went up. Not to mention Ubereats and Doordash or whatever cuts into that as well. Result? Prices of food goes up. What happens then? People say screw this, I'm gonna cook myself. They lose business, and they choose to either cut costs, or increase prices. Some choose the latter, which deters customers, losing profits, and the cycle repeats until they shut down. As for groceries, well now you're driving up demand in your local grocery store, pushing prices further higher as well. Unfortunately, higher interest rates isn't going to solve any of the above right now. It technically only solves the housing crisis, which tbh, my proposal is to make it much harder to qualify or buy a second property. I personally think housing prices are so high because the rich can afford a 2nd, 3rd property, while everyday families can barely afford one. Decrease the demand on houses, and hopefully this can help both immigrants who don't have a house yet, or new house buyers afford one, while those who already have a house find another avenue to invest. I'm no econ major or anything, just a reddit lurker who works in finance and grew up in Vancouver BC to immigrant parents. So please feel free to downvote me or discuss with me but these are my personal opinions.