Bank goes 50bps, first sign of possible pause | Page 2 | General financial discussion | Discussion forum

Wow! That's an amazing list, Matt.

I've been saying for a while now that I don't see how inflation can quieten down for quite a while because of a variety of factors. These are certainly some of 'em.

mordko said
An anecdote isn’t stats.

Having just bought a laptop, I have not noticed a 35% price hike over 3 years, let alone 12 months. Of course yours could be different. But the one I bought has more memory, CPU and bigger screen than a slightly cheaper 1 from 3 years ago. All technological improvements are accounted in CPI calcs because 12 months ago you bought an inferior product.
  

You say that anecdotes aren't stats. Quite true. But then you produce another anecdote to try to negate the previous one.

Anecdotes, when not resorted to for polemical reasons, are sometimes like the canaries in the coal mine. They are the harbingers of what is to come later in the form of stats.
I don't know what Matt's company does, but i know his prices are going to be reflected somewhere in tomorrow's stats and likely someone else's pain, maybe mine.

In fairness, Mordko was simply demonstrating laptops did not go up by 35%. If the laptops in MattS' business went up 35%, that business does not know how to buy laptops. Regardless, that is what the CPI model is for as Mordko correctly points out.

Loonie said
I'll let Matt tell us about his laptop, but of course it's only one of his many examples.

And maybe he can tell us when he expects his new prices to be reflected in the CPI.

As for the CPI, it doesn't tell us anything about what prices will be next month or in six months from now. Statistics are retrospective.

You can tell a lot about what is coming by looking at what's in front of you, as Peter Lynch wisely noted. Keep your eyes and ears open - and watch for those canaries!  

Quite right, CPI is a backwards looking factor. Matt implied that his backwards looking anecdotal experience with a tiny slice of CPI inputs shows that CPI estimates are wrong (see his last 2 sentences). That’s a very poor reason to question CPI numbers even if its not just the laptop.

He then proceeded to make a claim about future inflation using his factory’s input costs as the basis. As someone who owns a small business and sells to thousands of customers, I find that input costs have some impact but don’t set the price. Its all about supply and demand.

Perhaps Mr Lynch can tell what’s in front of us better than Mr Market. The rest of us can’t. Mr Market is telling us there is a recession next year. If true, that would hurt demand. Mr Market is telling us oil price will stay low. I am struggling to believe that but not gonna argue with Mr Market. Mr Market is telling us that 10-year average inflation in the US will be 2.3% (after high inflation in the short term).

to be clear, im a 25 yr empl at the same auto parts manufacturing firm. I dont own the business. I work in the supply chain / logistics / prod. planning areas of the business. I'm not a know it all by any means. My post was in response agreeing with "savemoreoften" that I didnt think we would return to 2% and that expectations would be managed by adjusting up the target to a higher level people can live with, like his suggested 3%. I was more or less theorizing, not being an expert in economics but some functioning knowledge, that is it possible inflation will settle down to the 2-3% range after this yrs 8% & then out of know where will inflation rear its ugly head in a couple yrs time when firms like the one I work at, have the opportunity to restore their shrinking margins back to where they need to be. & we will wonder where its coming from.. We are locked into pricing agreements.. Not sure what other industries or what percentage of Canadas businesses would be under the same situation. Another anecdotal example is it was just announced today that our skilled trades that make $39/hr will be receiving 7.5% wage increases so we can retain them. Anecdotally , we will also take this into account next time the OEMS remdodel. What effect will this have 2 yrs from now when we gap up, maybe not enough to move the needle.. Thats what I dont know about. Is this or isnt this a canary. dont know.. its information...

savemoresaveoften said The Bank of Canada could pause interest rate hikes as early as next month as it shifts to a more “data-dependent” approach to monetary policy, although the bank is still prepared to be “forceful” if necessary, deputy governor Sharon Kozicki said on Thursday.

You mean that they weren't relying on data for their first seven increases?!

Bill said
I understand the shift, it's very different than before.

Up to now they said interest rates are going to go up, naturally they did that in stages rather than all at once, now done.

Now they going to see how the data comes in re. the effect of this year's increases, to determine if and when they need to adjust rates again - "the bank is preparing to step back to assess the impact of its aggressive tightening on inflation and the broader economy."

Clear shift, and makes perfect sense, most people get that it takes time to see the impact of monetary policies, so now it's time to stop turning the steering wheel and observe how we're doing before turning the wheel further, holding steady or (very unlikely, though nothing is explicitly ruled out) turning the wheel back.

Be interesting to see if the shift in message has an effect on long-term GIC rates, at least in the weeks until the next announcement.  

Disagree. This is lip service. A PR exercise to sooth the chorus of dissent. As a subsidiary of the US, it seems obvious that we'll continue in lockstep with Powell and the Fed. Failure to do so will have many consequences, including cratering the CDN dollar. Rates go higher in the US (and other countries) and ours will follow suit. And it also seems more and more obvious that rates will remain at least at this level for some time to come, as noted by the IMF yesterday. Gun shy central banker types will be loath to speedily restore the good old days of flipping condos, FOMO speculation, and excessive liquidity.