The Bank of Canada came out with their rate announcement this morning & have kept rates unchanged, shocker! To put this in context the Bank has stated they will not look to raise rates until 2023. That’s what they’re saying. What could change that?
Well, remember that little thing by the name of inflation that for the last year I’ve saying is one of the more important factors to watch? It’s picking up. Commodities have been on a tear, housing is soaring & we’ve certainly noticed an increase in our monthly bills. Fixed rates, which are based on the government of Canada bond yields, have increased significantly in the last 2 weeks. The bond market generally does a good job at front running the economy & things, for now, are better than expected.
Keep in mind there is a great incentive in the powers that be talking down inflation while it slowly creeps up on everything b/c it allows debt to be inflated away as that debt becomes worth less. That’s known as a soft default. You’re not NOT paying your bills, your paying back bills that aren’t worth as much. The risk in talking down doing that is if all of a sudden the market realizes this they could be a sharp increase & shock which could end up being recessionary.
The Bank highlighted inflation is at the lower bound of its 1-3% range & expects it to move to the top end in the next few months but sees that slowing down as the excess capacity in the economy exerts downward pressure. Will they make it to 2023? I have no idea but will be watching it closely.
Thanks for watching & have a great day.