RE:RE:RE:RE:RE:RE:Some toughtsGood analysis Nobody.
IMO. The BofC will have Interest rates higher for a lot longer than they think. Because as I said quite a few times here. Inflation isn't as easy to bring down ,as people think. People/Companies that are charging high rates for their goods & services right now, aren't about to give up those profits that easily. The biggest indicator of that is FOOD at the Grocery stores. Why would these guys want to reduce profits by decreasing prices??? No incentive there. Plus they've being working on such low margins in the past 30 to 40 years, that they are welcoming Covid, Supply, or any other reason to keep prices high. Yes Gas Prices have may have come down slightly with many provincial incentives, but Natural gas prices are through the roof. This is only half of the problem anyway. Home prices are outrageous as well as shelter. Some countries Inflation rates do not include house prices in shelter such as us. That's why I listed both separately. This a huge dynamic in the Economy playing out right now.
Another is the FLOW of Money/Capital, Bonds etc. The Global Economy right now is in a transformation. The money will go to safe havens, higher rates, etc. And IMHO the rates will stay at this 4.25% to 4.5%, of where the BofC rate is right now, for a couple of years to come in Canada. Therefore we might see a couple of years of no growth, and a lot of hardship, really quickly in a years time. This is already happening as the HELOC's are maxed to the HILT here in Ontario at 40%.
The Inflationary curve has quite a few factors that influence it's direction.
The other is
Demand. BUT
we all know that supply has to increase to promote competition for Goods & Services for Inflation to come down. We are getting the higher rates to squash some of the consumer demand. But
the real Inflation fighter is SUPPLY. How can we bring supply UP? When idiots like Trudeau, want to bring these IMMIGRANTS into Canada either wealthy, or poor Immigrants, (which btw either group has it's challanges) by the 500K's a year into a supply of only 385K a year housing market. I'm discussing GTA's housing market because most of those Immigrants are Ontario bound. Because Legault has already told Trudeau recently, that he doeasn't want any of those Immigrants in Quebec. Alberta is advertizing on the radio, to get some of those Immigrants there. This Inflationary persistance is far from being resolved, and far from being resolved by one remedy like higher interest rates. In fact Interest rate decreases, aren't going to be in the cards for about 3 years. By then all those with Variable rates, and the overextended HELOC buyers of the BOOM in 2019 to 2021 will throw their hands up, and give succumb to even these relatively low rates of 5% to 6%. These are unprecidented times, and require carefull planning, as far as I'm concerned.
I can go on here for ever. Especially in the Monetary side, and flow of money. But this isn't the forum for that.
IMHO. Interest rates will stay at this rate, for 2 years minimum, and supply has to start catching up real soon. But how do we increase supply when the political decisions in Canada are incompetent. Trudeau needs help. Ford knows what he's doing here in Ontario. And then you have all these clueless protectionist & conservationists standing in the way of supply, that just keeps adding to Inflation. But mark my words. In the meantime the Interest rates have to stay up for a couple of years, or otherwise we're screwed.
stockitnow wrote: Good point, but you are assuming central banks will act in timely manner. They have always been reactive and have always been late to react.