*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[The Fonz]

Canada CPI for Dec 21 came in at 6.8% - was forecast to be 6.7%.

Dec 21 - 6.8%
Nov 16 - 6.9%
Oct 19 - 6.9%
Sept 20 - 7.0%
Aug 16 - 7.6%
Jul 20 - 8.1% - peak
Jun 22 - 7.7%
May 18 - 6.8%

[Slava]

Yeah, I don't think that's too bad though. It'll be interesting to see what the report is for December, on January 17 because the rate decision in Canada is the week after. Purely anecdotally, but a lot of things are easing. Gas prices have declined substantially, and of course home prices have seen declines. Eventually these things have to reflect in CPI.

And speaking with some people at various markets and things like that this year, sales aren't as high as years before. I think that the CPI will decline and we saw that peak in July. This bodes well for the rate increase to either be over for the time being or at least nearing the end.

And for something a little more scientific, the bond market has been showing this for a while now, along with GIC rates in Canada that have declined overall, and certainly over the longer term (2+ years).

[opendoor]

Not surprising that it held relatively steady. November and December 2021 were very low inflation months, so when the 2022 month replaces the 2021 one in the annual data, even just staying flat is relatively good news. The real reductions are more likely to start happening in early 2023.

As it is, we're at about 2.8% annualized inflation over the last 6 months and about 1.7% annualized over the last 5 months. The only real bad news is that core inflation remains high. But to some extent, that can reflect higher energy, transportation, and material costs in preceding months so it can take some time for the lower input costs to be reflected in retail prices.

[Yoho]

Not rate related but interesting trends.

https://twitter.com/user/status/1605608729176465415

[GGG]

Originally Posted by Yoho

Not rate related but interesting trends.

https://twitter.com/user/status/1605608729176465415

Housing cost magnified by interest rates and a increase in oil related jobs last year.

[Yoho]

https://twitter.com/user/status/1611011421285875714

Hard to imagine no rate hikes in 2023.

[Fuzz]

"Will the Bank of Canada raise mortgage rates again in 2023?"


Tell me again how good we are at financial literacy. Ugh.

[chemgear]

Big jobs numbers. More increases coming I would think.

[bizaro86]

Originally Posted by Fuzz

"Will the Bank of Canada raise mortgage rates again in 2023?"


Tell me again how good we are at financial literacy. Ugh.

I mean, I get you have concerns with Yoho/Twitter, but that's a distinction without a difference.

When the BoC raises short rates, the banks immediately raise prime which automatically raises variable mortgage rates.

Saying the BoC isn't raising mortgage rates is very much akin to Nelson hitting Milhouse with his own hand and saying "stop hitting yourself". The BoC owns the raise in mortgage rates even if someone who probably shouldn't be a financial pundit got the headline technically incorrect.

[Yoho]

https://twitter.com/user/status/1616500265598832641

[pseudoreality]

Originally Posted by bizaro86

I mean, I get you have concerns with Yoho/Twitter, but that's a distinction without a difference.

When the BoC raises short rates, the banks immediately raise prime which automatically raises variable mortgage rates.

Saying the BoC isn't raising mortgage rates is very much akin to Nelson hitting Milhouse with his own hand and saying "stop hitting yourself". The BoC owns the raise in mortgage rates even if someone who probably shouldn't be a financial pundit got the headline technically incorrect.

I disagree. That is not a good analogy. Nelson's intent is for Milhouse to be hit and he has no other considerations. Raising the overnight target rate has the side effect of raising variable rate mortgages, but that's not why they are doing it or even factoring into the decision much. Also, the majority of mortgages are fixed anyway. The Bank of Canada isn't sitting around a table debating on whether they should raise people's mortgages.

[Yoho]

Originally Posted by pseudoreality

I disagree. That is not a good analogy. Nelson's intent is for Milhouse to be hit and he has no other considerations. Raising the overnight target rate has the side effect of raising variable rate mortgages, but that's not why they are doing it or even factoring into the decision much. Also, the majority of mortgages are fixed anyway. The Bank of Canada isn't sitting around a table debating on whether they should raise people's mortgages.

https://twitter.com/user/status/1608880905673920513

It’s all intertwined.

[pseudoreality]

Originally Posted by Yoho

https://twitter.com/user/status/1608880905673920513

It’s all intertwined.

"..went variable in January 2022..." That doesn't mean a majority of mortgages are variable. That just means 57% of people getting a mortgage in January 2022 made a bad decision.

https://www.bankofcanada.ca/2022/11/...nd%20of%202019.

For most of 2021 and into early 2022, variable mortgage rates were substantially lower than fixed mortgage rates. As a result, many borrowers opted for a variable-rate mortgage. These types of mortgages now account for about one-third of total outstanding mortgage debt, up from about 20% at the end of 2019.

[chemgear]

Originally Posted by Slava

This bodes well for the rate increase to either be over for the time being or at least nearing the end.

Everything else being equal, I would kinda like them to get it over with rather than drag it out and have to keep raising it again in six months.

[lazypucker]

Will it get to a point when people start rioting if BoC keeps jacking up the prime rate?

[Northendzone]

i was at an economic forecast update event last week where todd hirsch was the speaker and his thinking is that he expects there to be three increases over the next few months of 25 basis points each - so 75 points in total and then some flattening out

can't be easy selling new vehicles and homes with these higher interest rates

[pseudoreality]

Originally Posted by lazypucker

Will it get to a point when people start rioting if BoC keeps jacking up the prime rate?

I doubt it. Inflation is worse and that is what's hurting most Canadians the most. I think more people would be upset if they did nothing to fight inflation and continued on with ultra low rates.

[Yoho]

Originally Posted by pseudoreality

I doubt it. Inflation is worse and that is what's hurting most Canadians the most. I think more people would be upset if they did nothing to fight inflation and continued on with ultra low rates.

I doubt it, people could care less about inflation when their house is getting foreclosed on when they renew.

[White Out 403]

Originally Posted by pseudoreality

I doubt it. Inflation is worse and that is what's hurting most Canadians the most. I think more people would be upset if they did nothing to fight inflation and continued on with ultra low rates.

Yes except whats causing inflation right now is supply chain issues and corporate profiteering. Not the working class going bankrupt servicing their debts and mortgages.

[GGG]

Originally Posted by White Out 403

Yes except whats causing inflation right now is supply chain issues and corporate profiteering. Not the working class going bankrupt servicing their debts and mortgages.

Raising interests raises LIBOR which increases corporate debt servicing costs which stops borrowing to pay dividends/buybacks and limits expansion. The same thing occurs on the personal income side:

The end result is people and businesses will buy less stuff.

The cause of inflation is excess money to chase goods. Corporations profiteering is a symptom of excess money chasing too few goods. (Wage growth is also a symptom of the same problem).

So until the supply chain is improved again we need to reduce the amount of money to stop corporate profiteering and wage growth which is driving inflation.