Bank of Canada lets it be known that they estimate rates to be between 2% and 3%, Consumer price index (CPI) inflation in Canada hit a three-decade high of 6.7% in March (Negative Interest Rates?)- April 29, 2022,
When you listen to Tiff Macklem it’s evident that the Bank of Canada is only interested in preserving the status quo. What I mean by this is The Bank of Canada will reward the Federal government’s unnecessary regulations on the economy, by forcing Canadian consumers to pay for unnecessary consumer price inflation while the Federal government continues to overly regulate the private citizens of Canada. As an example, not only can unvaccinated Canadians not travel by air in Canada, but there’s currently a backlog of Canadian passports because Canada’s federal government decided to get rid of the employees it hired that refused to adhere to its tyrannical covid-19 mandates.
So even if you did get vaccinated you’ll still find current delays in getting your passport?
Government has the historic data on when Canadians like to travel, but it decided to either ignore the data, or maybe the reality is that the government incompetent? This should make you think about what the Bank of Canada is doing with interest rates. In Canada, the Bank of Canada is a FEDERAL Crown corporation, n the United States, people like to point out that the Federal Reserve is the equivalent to Federal Express(a courier company). Meaning that the Federal Reserve is independent of the Government.
Well, in Canada, Crown corporations are State-run enterprises, and therefore it safe to assume that the job of Tiff Macklem is to make Justin Trudeau look good? Long story short, because there appears to be no goal for the Bank of Canada to fight inflation by raising interest rates above the CPI not only is consumer price inflation here to stay but likely there will be other price inflationary price hikes in the future.
Why this is problematic is because if the economy is unable to deflate, therefore rewarding a lot of economic ideas that have yet to have a positive effect on the economy, we could have years of recessionary activity. Fossil fuels as an example guaranteed growth in the economy, plastics as an example are everywhere, plastics in many ways replaced a lot of metals, which helped the economy to expand, well this war on fossil fuels is a war on plastics, it’s a war on everything made using fossil fuels, which is fine, but how long will it take before there’s a transition and how many people will have to be in poverty in the process?
Government wealth redistribution schemes don’t guarantee economic growth, so if there is no desire by the Bank of Canada in the financial sense to challenge the Federal Government, you’d be wise to consider the implications of this on the economy and your financial portfolio. I’ve been writing that I expect interest rates to potentially go negative in Canada, why do I write this?
Tiff Macklem of The Bank of Canada stated the following: “a neutral rate of interest that neither stimulates nor weighs on the economy. We estimate this rate to be between 2% and 3%.” is this, not Tiff Macklem estimating that he knows what’s best for the markets? Well if 2-3% is the ceiling imagine the economy takes a nosedive, somewhere in the future? Will Tiff Macklem raise rates, leave rates where they are, or lower them?
Based on the history of economic downturns, do central banks usually lower interest rates when the economy worsens? If Tiff Macklem raises interest rates as high as he imagines they can go, not to upset his boss(current Prime Minister Justin Trudeau), and raising rates doesn’t work to stop inflation, why wouldn’t negative interest rates be considered to stimulate the economy?
We recognize everyone wants to know where rates might end up—how high they will need to go. It is important to remember that we have an inflation target, not an interest rate target. This means we do not have a pre-set destination for the policy interest rate. But I can say that Canadians should expect interest rates to continue to rise toward more normal settings. By more normal we mean within the range we consider for a neutral rate of interest that neither stimulates nor weighs on the economy. We estimate this rate to be between 2% and 3%. Two weeks ago, we raised the policy rate to 1%, still well below neutral. This is also below the pre-pandemic policy rate of 1.75%.
The governor of the Bank of Canada says the bank will respond “as forcefully as needed” to curb inflation, and estimates that will require interest rates to rise to between two and three per cent.Opening Statement before the Standing Senate Committee on Banking, Trade and Commerce | bankofcanada.ca
Consumer price index (CPI) inflation in Canada hit a three-decade high of 6.7% in March
Interesting times ahead!