RE:RE:RE:REITS This might not be a popular opinion, but Tiff Macklem needs to continue to raise rates. The mistake he made was to pause when it was clear to me he was still far off the mark.
Why do I say this?
Well, if you look at CPI less energy we are still trending above 5% and its remained that way for months now. People are too fixated on headline numbers which has fallen mostly due to much lower energy prices. If you remove energy from the weighted basket then Cpi is still elevated and sticky.
Unit labour costs have also trended above 5% which is compensation costs minus labour productivity. If you're not productive at work, unit costs go up and so does inflation.
This tells me that Tiff has to take interest rates to at least 5-5.25% just to get to neutral. Failure to do this will force him to have to raise rates even higher which will increase the chance of a hard landing later on.
How does inflation come down?
1) increase the unemployment rate
2) increase productivity