Is the Bank of Canada making things worse?
Is the Bank of Canada making things worse?
The central bank is raising rates to fight inflation. No one else seems willing to help
I don't think they're making things worse, but as the article states, governments could be doing more. Incentivize purpose built rental units, provide better food security supports instead of parachuting money in.
I don’t think they’re making things worse
Why's that? Take a look at the CPI data sometime. Inflation is within the 2% target range if you exclude mortgage interest costs. Inflation is high specifically because of high interest rates pushing people to spend more on mortgages. Is it that you don't think the BoC has any impact on interest rates?
yo, that's not how the policy work. The increase is to stop extra money pumping into market because if you try to borrow and do stuff, then the cost is higher, ANY borrowing. (so business, house, car, etc. )
ie. if you are selling apple using borrowed money because the revenue-cost is positive enough to do it, interest rate increase will help stop you buying more apple(for resale) down the road. "but I can just offset the cost to consumer that buys my apple, right?" Yes you could but for merchant that does not need to borrow money to do it they have an edge over you. So while short term you will see people jack up price of apple to cover their bottom line, eventually, there is a point they can't get price up anymore to cover cause people will switch to buy orange instead. So people will do less risky business that involves borrowing money. And consumer just pick whatever they can afford. So if there is a trend that apple is too expensive, it will stick and lag behind, it affects all the way to produce as well and some apple selling business will close, and farm would cut production if people are not buying, then if this goes on longer, they will have to lower the price to recoup the money compare to losing everything. And people that originally think borrowing money to invest in apple will think hard(if they have good advisor), thus not much money in this "apple" market. Interest rate increase affects almost all industry, but the price coming down, to historical trend of inflation, will lag behind and are not immediately visible.
That's also why too few competition in grocery is bad cause you have to eat, for business that people have no choice but had to buy/use to survive, they should be regulated. ( Just imagine if your provincial water supply is a public traded company. )
Keep in mind that they manipulate the CPI to make it look not so bad.
For example, if the price of a luxury item spikes by 50% (like a lot of grocery items did in the last year), they'll remove it from the basket and put in a cheaper alternative instead. The idea is that what people would do, but the result is a figure that doesn't represent actual price increases.
Worth noting that's only if you include gas prices which aren't really controlled by anything Canada can do. Exclude them and you're still above the target range.
That's what they do, that's who does it, and how they do it.
They Don't Think It Be Like It Is, But It Do.
Raising interest rates are how the government fights inflation.
Except the BoC is not affiliated with the federal government. The feds have no control over what the BoC decides.
BoC tried to limit the money out there, the feds start printing checks and sending them out to Canadians. Its a slow game of lose and lose for all Canadians, except the rich.