*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[shermanator]

Leverage yourself to the tits and then blame someone else when you can't afford to service that debt. Classic...

[Ashasx]

Originally Posted by Jason14h

Even if someone took an elevated mortgage thinking rates would be low through 2023 what was their 2024-2026 plan

For me, I was putting money aside/investing at a rate higher than my mortgage rate for when I might need it upon renewal/when rates eventually went up.

I just didn't get to benefit from the -1% variable rate for as long I was hoping.

[Monahammer]

If a private sector CEO made the forward looking statements that Tiff Macklem did about stock performance, and said that a corporation would maintain conditions to ensure that performance, then didn't, they would be #### canned at the very least.

I also think Tiff Macklem is an incredibly irresponsible and frankly idiotic central bank leader. I am not sure he's criminal, but there is no conceivable way at all that this person should retain their job.

[bizaro86]

Originally Posted by powderjunkie

Income taxes seem like they'd be far too slow to respond, and since they are only an annual touch point they probably wouldn't impact consumer behaviour as much.

Increasing sales tax might work a bit better/faster, but again I'm not sure they'd have the same impact to consumer behaviour.

I think if you wanted to fight inflation and slow down the economy a temporary hike to the GST would be a great tool. Make it temporary with a fixed end date - that would cause people to delay consumption until the tax ends, which has the opposite effect of inflation expectations. Inflation becomes entrenched when people expect it and buy stuff as soon as they can to avoid future price hikes. Providing an incentive to delay consumption would offset that.

It would also generally take money out of the economy quickly but in a reasonably fair way (especially if you bumped rebates to compensate for low-income). If they repaid debt (or at least reduced the deficit) with the money instead of finding something to spend it on it would also lower money supply.

But no politician wants to run on that platform, so it'll never happen and the BoC has to fight inflation by itself.

[Slava]

Originally Posted by Monahammer

If a private sector CEO made the forward looking statements that Tiff Macklem did about stock performance, and said that a corporation would maintain conditions to ensure that performance, then didn't, they would be #### canned at the very least.

I also think Tiff Macklem is an incredibly irresponsible and frankly idiotic central bank leader. I am not sure he's criminal, but there is no conceivable way at all that this person should retain their job.

Interesting, but what do you think should've been done differently? I think that BoC has actually handled things very well. It's not exactly an easy balancing act to say "here we have two overheated real estate markets, and a gulf in between where the real estate market was crushed for 6-7 years, so we'll address this through monetary policy".

During Covid, they cut rates and tried to do what they could to make sure that the economy didn't entirely crater. Being that we'd never done anything like that in modern history (effectively putting the economy into a coma), I'm not sure where the clearly made mistakes?

And coming out of Covid, they've navigated some fairly difficult challenges. Inflation looks like it's peaked and is easing, the unemployment rate isn't catastrophic and they could actually pull of the "soft landing" that everyone thought was impossible 3/4 months back.

From where I'm sitting that looks pretty solid, if not downright impressive under the circumstances. Quite curious to hear why they're so dumb though.

[Sliver]

Originally Posted by Monahammer

If a private sector CEO made the forward looking statements that Tiff Macklem did about stock performance, and said that a corporation would maintain conditions to ensure that performance, then didn't, they would be #### canned at the very least.

I also think Tiff Macklem is an incredibly irresponsible and frankly idiotic central bank leader. I am not sure he's criminal, but there is no conceivable way at all that this person should retain their job.

Are you joking around? This isn't true at all.

Ever heard of earnings guidance? If analyst forecasts become out of whack due to a change in conditions companies will issue an earnings guidance release and often follow it with an analysts' call.

Ever worked in Investor Relations and you have an earnings announcement coming out and you're not going to meet the street? Yeah, that sucks, too, but nobody gets #### canned over it.

I don't think you know what you're talking about lol.

[Monahammer]

Originally Posted by Sliver

Are you joking around? This isn't true at all.

Ever heard of earnings guidance? If analyst forecasts become out of whack due to a change in conditions companies will issue an earnings guidance release and often follow it with an analysts' call.

Ever worked in Investor Relations and you have an earnings announcement coming out and you're not going to meet the street? Yeah, that sucks, too, but nobody gets #### canned over it.

I don't think you know what you're talking about lol.

I disagree entirely, that's one of the biggest reasons that CEOs subsquently meet the street too.

There's always boiler plate attached to the investor statements essentially saying do not believe anything our CEO is saying here because it will change, and there are still extremely tight controls from auditors and corporate lawyers over what exactly you can and can't say on an earnings call. It's generally extremely controlled. A CEO wouldn't make a statement like Tiff did, essentially providing a guarantee that a specific indicator would remain unchanged for a period of years.

It's worse than all of that, because a CEO isn't a government employed regulatory authority. Tiff is, so the fact that he was able to make such boundless statements with seemingly no penalty is especially egregious. How does this not dramatically erode public trust in the BOC? Isn't one of Tiff's primary roles to ensure public trust in the central bank remains strong?

[BlackArcher101]

Maybe the next time they speak in public they should scroll a forward looking statement disclaimer over the screen, star wars style.

[Sliver]

Still calling BS. I've literally worked in IR and have penned earnings guidance releases and sat in on conference calls. If conditions change in a way that is not management's fault, the CEO isn't going to get "#### canned". And if it is management's fault, still unlikely to get #### canned unless something egregiously stupid happened or they were on their way out already.

[Monahammer]

literally laughing out loud at the star wars forward looking statement. I proposed something similar once for a public presentation.

What are you calling BS on silver? Yeah, ok, market conditions changing is not what I meant. I meant if a corporation is in control of a specific indicator, the CEO says that indicator won't change for a number of years, and then goes and changes it because of market conditions to the great detriment of many shareholders, they are going to see problems. The problem here is that comparing the BOC to a publicly traded business is actually asinine- mea culpa. But I think Tiff is getting off way to leniently here. He deserves a hell of a lot more scruitny- he might be making the right decision now, but to make that sort of public statement was extremely, extremely irresponsible for someone in his position.

[Fuzz]

Aren't those statements also carefully crafted by the entire board of the BoC, not just Tiff?

[Sidney Crosby's Hat]

Originally Posted by bizaro86

I think if you wanted to fight inflation and slow down the economy a temporary hike to the GST would be a great tool. Make it temporary with a fixed end date - that would cause people to delay consumption until the tax ends, which has the opposite effect of inflation expectations. Inflation becomes entrenched when people expect it and buy stuff as soon as they can to avoid future price hikes. Providing an incentive to delay consumption would offset that.

It would also generally take money out of the economy quickly but in a reasonably fair way (especially if you bumped rebates to compensate for low-income). If they repaid debt (or at least reduced the deficit) with the money instead of finding something to spend it on it would also lower money supply.

But no politician wants to run on that platform, so it'll never happen and the BoC has to fight inflation by itself.

This is a really good idea and I think it would work in the US but not necessarily Canada where you need to raise interest rates if the US does to ensure the dollar isn't devalued. If you just had a temporary GST but the US kept raising their interest rates, there would still be significant inflation in Canada as a result of acquisition cost rising due to a weakened dollar.

Unfortunately, I don't believe the US has a mechanism for a national sales tax but it would definitely work down there (and if they were able to do such a thing, I'd be all for Canada doing it as well).

[powderjunkie]

Originally Posted by Monahammer

I disagree entirely, that's one of the biggest reasons that CEOs subsquently meet the street too.

There's always boiler plate attached to the investor statements essentially saying do not believe anything our CEO is saying here because it will change, and there are still extremely tight controls from auditors and corporate lawyers over what exactly you can and can't say on an earnings call. It's generally extremely controlled. A CEO wouldn't make a statement like Tiff did, essentially providing a guarantee that a specific indicator would remain unchanged for a period of years.

It's worse than all of that, because a CEO isn't a government employed regulatory authority. Tiff is, so the fact that he was able to make such boundless statements with seemingly no penalty is especially egregious. How does this not dramatically erode public trust in the BOC? Isn't one of Tiff's primary roles to ensure public trust in the central bank remains strong?

For the trillionth time, he did no such thing.

The especially public nature of those statements was somewhat exceptional, and in fact very very intentional in an extraordinary time. That in itself was enough for most sensible people to raise a Spockian eyebrow...

[Monahammer]

Originally Posted by powderjunkie

For the trillionth time, he did no such thing.

The especially public nature of those statements was somewhat exceptional, and in fact very very intentional in an extraordinary time. That in itself was enough for most sensible people to raise a Spockian eyebrow...

Yeah, but we know the majority of people are not "sensible" when it comes to finances. I agree, it was an exceptional and extraordinary time... but to blast it out so publicly? That was a choice. A poor choice.

And yes, he did, here he is saying it:

https://www.bnnbloomberg.ca/interest...klem-1.1465901

"“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said."

[powderjunkie]

Originally Posted by Monahammer

Yeah, but we know the majority of people are not "sensible" when it comes to finances. I agree, it was an exceptional and extraordinary time... but to blast it out so publicly? That was a choice. A poor choice.

And yes, he did, here he is saying it:

https://www.bnnbloomberg.ca/interest...klem-1.1465901

"“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said."

Is 2 years not a long time?

[Monahammer]

Originally Posted by powderjunkie

Is 2 years not a long time?

When the people you are talking to specifically in that statement (he said Mortgages) typically are engaging in loans with ~20-25 years in them, then I would say 2 years (10% or less of the total) is most certainly NOT a long time.

[Sliver]

Originally Posted by powderjunkie

Is 2 years not a long time?

Honestly, it could be argued they're still pretty low.

[Sliver]

I don't get where we're supposed to have sympathy, though. Like, if below 2% wasn't low enough for people to lock in, then fata 'em. That's just gambling. Like, giant risk of rates going up and no real opportunity to go much lower, why would people opt for a variable rate? I don't get the logic.

[Monahammer]

Originally Posted by Sliver

I don't get where we're supposed to have sympathy, though. Like, if below 2% wasn't low enough for people to lock in, then fata 'em. That's just gambling. Like, giant risk of rates going up and no real opportunity to go much lower, why would people opt for a variable rate? I don't get the logic.

I don't disagree- personally I am an always lock in type, so locked in a rate prior to the fall and still have 1.5 years left to look at another term. I think it's likely to end up very near my current rate.

I'm not saying this for the people who are now in jeopardy necessarily- what I think is important here is the responsibility of people leading important public institutions. These people in jeopardy IMO are not very different than people who are convinced to throw money in a ponzi scheme.

[tvp2003]

Originally Posted by Sliver

I don't get where we're supposed to have sympathy, though. Like, if below 2% wasn't low enough for people to lock in, then fata 'em. That's just gambling. Like, giant risk of rates going up and no real opportunity to go much lower, why would people opt for a variable rate? I don't get the logic.

Most new first time homebuyers probably had no concept of a 5% interest rate (even though that was only 15 years ago) let alone 20% like in the early 80's.

It's hard to blame them -- hopefully they got good advice along the way but I certainly didn't when we bought our first property. Over the years, I've come to know that any mortgage rate that starts with a 2.xx is good, anything with a 1.xx you sign for as long as you can and don't look back.

I think the rub is that people who aren't "gamblers" by nature get sucked into the advice that variable is usually better in the long run; even when you go fixed, it's easy to think you're "losing out" if interest rates drop.