RE:RE:RE:RE:RE:RE:RE:Some toughtsHi 859,
I follow your logic and agree that central banks tend to wait too long to start the change cycle of interest rates.
I do point out, however, that prices do not need to be lowered by anyone for inflation to come down. Inflation is a measure of increases in prices. So, if the grocery prices stop increasing by 10% and only increase by 2%, then that is the goal. Same with house prices.
The central banks know that if prices of houses go down it will have a huge negative effect. That is why sometimes you will hear gov departments talking about housing bubbles. They don't want to take the blame for the hell that will ensue if prices start to go down.
international money movements do not play into inflation. They do effect the exchange rate and that can effect the amount of foreign money coming to Canada. But that is generally investment money that wants to be able to leave as quickly as it arrives and therefore is not invested in anything other than bonds. Usually gov bonds. And that does have an effect on the interest rates on the bond markets, but not much effect on the housing market. Housing market interest rates are more effected by U.S. interest rates as that is the pool that Canadian banks go to for funds to lend for housing.