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Email this7:12 pm
January 13, 2022
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smayer97 said
Again, NOTHING to do with controlling inflation, nothing to do with political pressures. ANYONE can see the TRUE and ONLY influencing factor.... don't be fooled.Once I checked this out and proved it to myself, I no longer fall for all these talking points.
I've noticed that the US 3 month t-bill seems to pull the fed rate along for the ride, as this graph illustrates. Focus only on the blue (fed rate) and the green (3 month t-bill).
9:09 pm
September 29, 2017
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🙂
Likewise for the CAN equivalents...
9:34 pm
April 6, 2013
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AltaRed said
Still, only about 0.18% of mortgages are in arrears, which is up about 35% from 0.13% a year or two ago. https://financialpost.com/news/mortgage-delinquency-rates-ontario-british-columbia-soar Canada can't quite help it if 'regional' Ontarians and 'regional' British Columbians threw caution to the wind and became reckless.
…
Ontarians and British Columbians are doing fine as well.
Canadian Bankers Association statistics show the same 0.18% delinquency rate Canada wide. Ontario is up to 0.12% (from 0.07% in December 2022) and BC is up to 0.14% (from 0.11% in December 2022).
Looks like fake drama. Just as my drinking would be if it was up 100% from one drink per week to two per week.
4:41 am
April 27, 2017
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Norman1 said
AltaRed said
Still, only about 0.18% of mortgages are in arrears, which is up about 35% from 0.13% a year or two ago. https://financialpost.com/news/mortgage-delinquency-rates-ontario-british-columbia-soar Canada can't quite help it if 'regional' Ontarians and 'regional' British Columbians threw caution to the wind and became reckless.
…Ontarians and British Columbians are doing fine as well.
Canadian Bankers Association statistics show the same 0.18% delinquency rate Canada wide. Ontario is up to 0.12% (from 0.07% in December 2022) and BC is up to 0.14% (from 0.11% in December 2022).
Looks like fake drama. Just as my drinking would be if it was up 100% from one drink per week to two per week.
Delinquencies reflect not just the indebtedness, but also unemployment. Which is still low by Canadian standards but is going up. And the number of open positions being advertised is almost zilch.
So, while nobody knows the future, the trend is noteworthy, wouldn’t you say?
I recall that in December 2021, as the annual rate of inflation was shooting up, a couple of local experts were advising us that there was nothing to see, to ignore the trend, to average with the previous year and not to pay attention to obvious drivers, such as money supply. How did that work out?
5:03 am
March 30, 2017
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Norman1 said
AltaRed said
Still, only about 0.18% of mortgages are in arrears, which is up about 35% from 0.13% a year or two ago. https://financialpost.com/news/mortgage-delinquency-rates-ontario-british-columbia-soar Canada can't quite help it if 'regional' Ontarians and 'regional' British Columbians threw caution to the wind and became reckless.
…Ontarians and British Columbians are doing fine as well.
Canadian Bankers Association statistics show the same 0.18% delinquency rate Canada wide. Ontario is up to 0.12% (from 0.07% in December 2022) and BC is up to 0.14% (from 0.11% in December 2022).
Looks like fake drama. Just as my drinking would be if it was up 100% from one drink per week to two per week.
Not the expert so cant say if 0.12% is a big number or manageable, or 0.07% is or is not a non event either.
If one drink per week is the max it should be, then up it to 2 drinks can have dire consequences, not just your wallet lol
7:33 am
November 8, 2018
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Alexandre said
I haven't expected BoC to keep key rate where it is. I thought BoC will cave to political pressure and start lowering rates.
Level of mental gymnastics to convince BoC cut rates is truly astonishing:
Jim Thorne, the chief market strategist at Wellington-Altus Private Wealth, said in an interview with BNN Bloomberg on Wednesday that policy is now driving inflationary pressures.
“...There is a unique time, a very nuanced time where rate hikes cause inflation and therefore rate cuts cause disinflation. And the Bank of Canada should be cutting rates to bring inflation down.”
Cut rates to increase borrowing, which will bring inflation down!
Enjoy full article here: https://www.bnnbloomberg.ca/chief-market-strategist-says-boc-should-cut-amid-policy-induced-inflation-1.2044037
9:05 am
January 13, 2022
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Alexandre said
Alexandre said
I haven't expected BoC to keep key rate where it is. I thought BoC will cave to political pressure and start lowering rates.Level of mental gymnastics to convince BoC cut rates is truly astonishing:
Jim Thorne, the chief market strategist at Wellington-Altus Private Wealth, said in an interview with BNN Bloomberg on Wednesday that policy is now driving inflationary pressures.
“...There is a unique time, a very nuanced time where rate hikes cause inflation and therefore rate cuts cause disinflation. And the Bank of Canada should be cutting rates to bring inflation down.”Cut rates to increase borrowing, which will bring inflation down!
Enjoy full article here: https://www.bnnbloomberg.ca/chief-market-strategist-says-boc-should-cut-amid-policy-induced-inflation-1.2044037
The industry puppets abound. But this one is truly priceless, I agree.
11:35 am
September 29, 2017
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CBs will NEVER cut rates UNLESS the short-term bond market responds by causing a lowering of those rates. The CB ALWAYS follows bond market rate changes, ALWAYS trying to stay within 0.25% of the bond market, i.e. reacting to, and NEVER leading.
In other words, the CB does NOT act independently of the bond market. No amount of postulation or any other mental gymnastics will change that.
11:58 am
March 30, 2017
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smayer97 said
CBs will NEVER cut rates UNLESS the short-term bond market responds by causing a lowering of those rates. The CB ALWAYS follows bond market rate changes, ALWAYS trying to stay within 0.25% of the bond market, i.e. reacting to, and NEVER leading.In other words, the CB does NOT act independently of the bond market. No amount of postulation or any other mental gymnastics will change that.
At least 2 or 3 times in the past what u said above has already been proven WRONG.
12:00 pm
October 27, 2013
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It is simply best to not respond to such strong opinion. It wore thin after a few posts.
7:19 pm
September 29, 2017
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savemoresaveoften said
At least 2 or 3 times in the past what u said above has already been proven WRONG.
I would love to be enlightened... no tongue in cheek, really, and not just for me but for anyone else reading. I'm all about being educated.
3:19 am
April 27, 2017
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Alexandre said
Alexandre said
I haven't expected BoC to keep key rate where it is. I thought BoC will cave to political pressure and start lowering rates.Level of mental gymnastics to convince BoC cut rates is truly astonishing:
Jim Thorne, the chief market strategist at Wellington-Altus Private Wealth, said in an interview with BNN Bloomberg on Wednesday that policy is now driving inflationary pressures.
“...There is a unique time, a very nuanced time where rate hikes cause inflation and therefore rate cuts cause disinflation. And the Bank of Canada should be cutting rates to bring inflation down.”Cut rates to increase borrowing, which will bring inflation down!
Enjoy full article here: https://www.bnnbloomberg.ca/chief-market-strategist-says-boc-should-cut-amid-policy-induced-inflation-1.2044037
Quite. This is Erdoganomics. Tried and tested in Turkey. Worked well. So far they achieved 67% inflation by lowering rates to lower inflation.
5:27 am
March 30, 2017
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smayer97 said
I would love to be enlightened... no tongue in cheek, really, and not just for me but for anyone else reading. I'm all about being educated.
October 1998 - Russian financial crisis, Asian economic crisis, & collapse of the hedge fund LTCM
The FOMC made a surprise interest rate cut of 0.25%, from 5.25% to 5.00%. It lowered it again to 4.75% on November 17, 1998, before raising in 1999 and 2000 to a peak of 6.5%.
2001 - Tech Bubble Burst & 9/11
On January 3, 2001, the Fed announced a surprise interest rate cut by 0.50% to 6%.
The FOMC announced an emergency rate cut on September 17, 2001, by 0.50%, from 3.50% to 3.00% to provide liquidity to markets after the terrorist attacks.
January 22, 2008 – Recession risks mount as stocks crash so the FOMC cut rates by 0.75%, from 4.25% to 3.50%.
January 30, 2008 – The FOMC cut rates another 0.50% to 3.00%.
Dont remember exactly but its either the Jan 22 or Jan 30 was the most shocking cuz one of those is just days before a FOMC meeting. Markets expect FOMC to wait till the meeting but FOMC went ahead and surprised every one.
Every surprise rate cut the bond market scrambled to react, and certainly not CB follow bond traders. Traders make way more money than central bankers, but central banks have the power that traders dont.
https://www.onebridgewealth.com/content/Abriefmodernhistoryofsurprisefedannouncements.
A good article to read that summarize major rate events in the last 20 years.
12:50 pm
September 29, 2017
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Thank you very much for taking the time to find me some examples. So, let's look at some of what you posted, working backwards. As I can see, all your examples are US-based, so I'll follow along.
Jan 30, 2008, CB rate was at 3.5% BUT the bond market had already dropped at about 2.25%, about 12 days BEFORE (far more that 0.25%). So the CB rate change by 0.50% should have been NO surprise by following the chart. The surprise should have been that they did not drop it even more.
Jan 22, 2008... CB rate was sitting at 4.25% BUT the bond market was hovering around 3.25% (again far more that 0.25%) WEEKS before the CB rate change. So the CB decreasing it to 3.50 was NOT a surprise, if one was following the charts. Again, the surprise should have been that they did not drop it far more....
(possibly to protect the Feds balance sheets?)
It seems that back then, the CB was allowing a larger spread between the CB rate and the bond market...BUT again they always FOLLOWED.
Jan 3, 2001... again, the CB rate was at 6.5% BUT the market had been moving down over the month of Dec and reached about 5.7%, then even spiked down DAYS before the announcement to below 5.2% BEFORE the announced 0.50% drop by the CB. (Why such a spike down just before the announcement? Because the market WAS anticipating a large change, but overestimated that change, so bounced back quickly, only to resume a huge downward trend that the CB had to continue to chase for MANY months until the end of the year!).
The "emergency" rate cut was simply because the market was moving much faster than the long waits between announcement dates BUT again, the CB NEVER LEADS the rate changes.... they ONLY FOLLOW.
I can go on but it is just more of the same (and this would become a VERY LONG post).
All you have to do was to look at the chart for each of those CB rate changes and you can see that the bond market was AHEAD of the change. Therefore, the CB HAD to change the rate at the following announcement. If one was following the charts, it was EASY to predict the CB change AND by approximately how much.
So all of this was ONLY a "surprise" to the general public, and the media and pundits HAVE to sell it as a SURPRISE to make news... BUT anyone following the charts would have seen this coming well in advance!
Again, don't take my word for it...check out the TIMING on the charts yourself. You can OBJECTIVELY see that what I am saying is true. NO guessing involved and NO SURPRISES! (THAT is the beauty of all of this... it is NOT subjective.)
2:28 pm
January 13, 2022
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My two cents worth, and yes, that's all it's likely worth...I'm as far from an expert on monetary policy as you will find.
I think that Smayer97 is correct in suggesting that CB rates appear to follow 3-month and 6-month t-bill rates. The graphs are very clear on this. He's right that you can't argue with this when it's so clearly illustrated in any number of graphs.
But it seems likely that both short term t-bill rates and the CB rate both fluctuate on the basis of some of the same important factors, namely state of the economy and inflation. But t-bill rates are free to float and fluctuate on a daily basis, responding in almost real time to changing conditions. CB rates are not free to do this. CB rates are only adjusted at pre-determined intervals, and thus changes do not reflect responses to new information in real time -- instead, they are lagging.
So as Smayer97 points out, short term t-bill rates can be used as a predictor of lagging CB rates (and there are plenty of references to this predictive power online). From there, it might be easy to assume that the rapidly-changing t-bill rates are somehow influencing the CB rate. Seems pretty clear that you shouldn't make this jump in reasoning. And to be fair, I don't think Smayer97 is saying this. He's only saying that, if you want know where the CB rate is going, 3-month and 6-month t-bill rates give some pretty clear clues.
3:49 pm
November 18, 2017
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savemoresaveoften: Home prices just reversed and took off upward again. The BoC will also be looking at that. Our current inflation is just barely inside the target range, so we can't consider it "licked."
Immigration, investment and interprovincial migration all interact with real estate prices. There are always arbiters trying to pull the profit out of anything - auto curbers, REITs, airbnb holders and more.
I applaud any jurisdiction that acts to stop this. Housing is needed for housing, not as another pyramid scam waiting for the next crash.
Alexandre: I agree that Thorpe's smoking his socks.
Mordko: Turkey was in post-insurrection, mass-refugee mode with huge job losses. Tough to compare to anything. Poverty lowers inflation.
RetirEd
4:15 pm
March 30, 2017
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lifeonanisland said
So as Smayer97 points out, short term t-bill rates can be used as a predictor of lagging CB rates (and there are plenty of references to this predictive power online). From there, it might be easy to assume that the rapidly-changing t-bill rates are somehow influencing the CB rate. Seems pretty clear that you shouldn't make this jump in reasoning. And to be fair, I don't think Smayer97 is saying this. He's only saying that, if you want know where the CB rate is going, 3-month and 6-month t-bill rates give some pretty clear clues.
On multiple occasions and on different threads, Smayer97 is loud and clear that bond markets AlWAYS ‘dictate’ CB’s overnite rate and CB just follow, essentially bond traders set the monetary policy and not CB. That is just 100% wrong, 100% of the time.
And why do one needs to use t bill rates to give u clues ? The CB gives u clues at every meeting statement. That is the FIRST clue that is given, and the T-bill traders use that clue to adjust rates, and then CB adjust the rate at the next meeting. The reason for the whole process is such that there is little to no surprises most of the time. But its the CB that gives the first clue, not the bond traders as Smayer97 keeps believing in....
4:21 pm
April 27, 2017
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Not sure it makes sense to blame 2024 Turkish inflation on the 2016 coup attempt. After the coup inflation was in single digits.
In any case, attempted coups have little impact on inflation and immigration tends to lower wages.
However Erdogan has been running inflationary fiscal policy (by spending lots, and implementing other populist measures like hiking minimum wage beyond means, like in the fall of 2023). At the same time Erdogan has been firing central bankers who refused to reduce interest rates in response to higher inflation. While at it, Erdogan blamed “the Jews” for inflation and for the basics of monetary theory (you lower inflation by raising interest rates and by reducing money supply).
The idea that increasing money supply will lower inflation is stupid, regardless of the country. We’ve seen it tried in Canada before.
7:46 pm
December 12, 2009
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BlueSky said
Canada's economy is not performing as well, to justify a rate reduction anytime soon. Governments will continue making buzz about lowering rates, to give hope to many struggling Canadians. So, holding rates at 5% is likely to continue for a little while longer, despite politicians desire. The Canadian economy is at the bottom in the G7. Inflation is not tamed just yet, compounded carbon taxes are continuing to cost more to all, the lack of affordable housing and shortage of housing will continue to cause rising costs, corporations are cutting staff. Under these conditions, it's hard to see interest rates going down. Most banks bet on a longer term recovery, so their best rates now are within 1-1.5 year terms.
+1 to this. BlueSky's post is the smartest of this thread, and I agree with it. The Canadian economy is not as rosey as the U.S., and the BoC does not have the same luxury as the U.S. Federal Reserve in terms of not cutting rates multiple times this year. Whereas I think the Fed could easily hold rates where they are for all of 2024 and not bat an eye, the BoC does not have that same luxury and will either need to (a) cut rates by 100-150 bps more gradually over the course of the year or (b) do so abruptly in the back half of the year. Looks like they're opting for the latter, and I'm not sure why. Only thing I can think of is they want to try and maintain a stronger Canadian dollar...
Cheers,
Doug
5:16 am
March 30, 2017
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It’s interesting Trudeau keep saying carbon tax is revenue neutral, and most get it back in some form of tax rebate, yet we all feel and believe it costs us more. Just my nat gas carbon tax is a few hundred a year, and same tax on gasoline is similar. I certainty don’t rec $500+ back in year in any tax rebate to offset.
As for BofC cutting rates, it will be in baby steps if that. There is no recession, job growth is fine, no mass bankruptcies or loan delinquency, any material rate cut is simply not justified. Politicians can have their wishes to please voters, CB don’t operate like that and remain independent in their policy making. The moment CB starts caving in to politician’s pressure, I will have zero faith in our monetary policy and our currency.
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