Bank of Canada up by 1% | General financial discussion | Discussion forum

agit said
Bank of Canada up by 1% to 2.5%

hmmm well i guess it right on my previous post  

Being that this forum is on a website known as highinterestsavings.ca, it's positive news for savers, not so much for those that need to borrow. I'll patiently wait with interest (pun) to see how the banks move on HISAs and GICs, in the meantime I'll go make some popcorn.

Norman1 said

want8tracks said
Is this supposed to stop or slow down inflation? Not so sure raising interest rates helps anymore.

Neither. Bank of Canada has been bringing their rate up to neutral so that interest rates are neither stimulating nor dampening the economy. The neutral rate is somewhere between 2% and 3%.  

If 2.5% is now within the neutral band, would that mean any further increases will then focus on tackling inflation? Seems we have a ways to go before inflation is tamed.

JohnnyCash said

If 2.5% is now with in the neutral band, would that mean any further increases will then focus on tackling inflation? Seems we have a ways to go before inflation is tamed.

Rates may or may not be neutral yet.

Their calculations indicate the neutral rate is somewhere between 2% and 3%. Bank of Canada is not sure, for example, whether the neutral policy rate is 2.14% or 2.95%. They will be monitoring the economy to see.

Yes, it will be a while before inflation comes down. Not within months. Maybe in two years. Unfortunately, inflation from supply-side issues is not going to be fixed painlessly by interest rate hikes.

The challenge is actually not bringing inflation down. The challenge is bringing inflation down without causing a bad recession and the suffering that comes from that.

Bill said
With widespread labour shortages it would have to be a pretty severe recession to cause folks to be unable to find work, can't see it happening.  

Unions are already demanding higher wages due to inflation. Higher wages in themselves are inflationary. Unions are not helping to combat inflation.

COIN said

Unions are already demanding higher wages due to inflation. Higher wages in themselves are inflationary. Unions are not helping to combat inflation.  

every body only looks after themselves, as prices go up, people ask for higher salary to compensate. Unions are a economy's worst enemy in my mind.

High interest rate couple with high inflation will eventually crush the demand for almost anything / everything. When that happens, recesssion hits, business starts letting their staff go, the economy resets itself. The cycle resets itself, always has, always will.

Bruford said

We will soon see a flood of foreclosed real estate, auto repossessions, . . .

 

And from my 30+ years of living in Boom/Bust Alberta ... have Lotsa Cash on hand, to take advantage of those ⬆ 'Opportunities'.

It'll soon be Bargain-Basement-Day-At-The-Bay ... Hooray ❗

Dean

agit said
We are seeing the beginning of the 2022 version of The “Volcker Shock” to temper inflation hold on to your seat more shocks to come.  

I'm old enough to remember the Jimmy Carter recession, Joe "Sell Everything" Granville and, of course, Paul Volcker. That recession taught me a lot of valuable lessons that have served me well in the years since.