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Originally Posted by opendoor
What a weird comparison. The UK had to engage in emergency Quantitative Easing to overcome disastrous government policy that threatened pension funds' liquidity. Meanwhile Canada raised rates by only 50 points, which still has us with some of the highest rates in the industrialized world (while having among the lowest inflation). Yeah, totally the same thing.
Just to put Canada and the inflation/interest rates into context, here are other major industrialized nations with their inflation rate minus their interest rate (lower number is better in terms of likelihood of handling inflation):
Germany: 8.75 points
UK: 7.85 points
Italy: 7.65 points
Spain: 7.65 points
United States: 4.95 points
Australia: 4.7 points
France: 4.35 points
Singapore: 3.61 points
Canada: 3.15 points
Japan: 3.1 points
South Korea: 3 points
Switzerland: 2.8 points
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Calculating inflation rate minus interest rate isn't a tangible statistic to measure anything outside of real inflation. It has little correlation.
UK's situation is more dire then Canada's. There are also some very obvious geopolitical reasons for why Europe is seeing higher inflation. The US also has some significant challenges it needs to face.
Both being arguable worse doesn't make Canada's garbage smell any better, and unlike the US, Canada does not have a global currency that investors flock to during a crisis, exasperating our inflation woes. Canada also has the house of cards it built with its RE bubble it has to manage and avoid it fully collapsing and putting Canadians on the streets. Canada's situation is unique to Canada and combating inflation here with interest rates is much more likely to cause a deeper recession then in the US.
if you really want to pull some wild, completely irrelevant context may as well pull Argentina.
https://www.cnbc.com/2022/09/16/arge...vershoots.html
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Argentina’s central bank hiked the country’s benchmark interest rate 550 basis points to 75% on Thursday, a day after inflation overshot forecasts to near 80% on an annual basis.
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let's see, according to opendoor math and conclusion derived from it, there's only a 5% spread between inflation and interest rates, they are doing great and managing their economy so well! Much better then Germany and on par with the US.
Is that the conclusion you are trying to project here? That Argentina is doing better then Germany and combatting inflation better? Or Argentina cannot be counted because of some narrative on what countries can be used?
What about Brazil? It has interest rates at 13% and inflation at 8.25%, it's running the best economy in the world and handling inflation the best most clearly according to your context.
Lesson: don't try to make conclusions out of a statistic that has no correlation and not accounting the unique economic situation of each country. Raising interest rates too high too quick has severe economic consequences, likewise not combating inflation (as the BoC failed to do until it was too late for any soft landing approach) could cause it to spiral out of control.
Canada raising interest rates to 10% and killing inflation but killing the economy in the process, doesn't make them 'win' some type of race. And that is why they will likely raise their CPI inflation target despite just a year ago still stubbornly calling inflation transitory.