Canada’s inflation rate decelerated to 3.4 per cent in the year up to May, Statistics Canada said Tuesday, led by sharply lower gasoline prices. But beneath the headline slowdown in consumer prices, many facets of the cost of living are still increasing at an eye-watering pace. Grocery prices went up at an almost nine per cent pace.
The Canadian government does not control the bank of canada
True but the government can take legislative measures that would decrease inflation, and so it wouldn’t be necessary to raise rates.
True, and the Bank of Canada is doing what it said it would do. It’s just well beyond the ability of the BoC to solve inflation on it’s own. The best it can do is raise rates until we end up in stagflation, which I believe we are dangerously close to.
I also have to admit that many of the underlying causes of inflation are out of Canada’s control, this is without doubt an international problem. Having said that, there is a great deal Canada still can do to influence inflation and the cost of living.
As an example, wrt housing, raising the interest rate slows demand, by making it harder for people to afford house, but it also slows building by reducing access to capital to actually build more houses (hence stagflation). This is why the BoC and interest rates are insufficient. However, the Federal government could get back into the business of building public housing. That right there would go a long way to reducing the cost of living. Would it solve everything? No. But it would help one aspect.
You aren’t wrong. The problem with making the economic decisions they make, is they are taking data for time already passed and making based decisions on how they think the economy will react in the future, knowing what they know. It’s also an international problem for sure, really the core of it is that debts been too free for far too long, and then COVID hit, meaning all the major world economies had to print their way out of it, worrying about the consequences later. And I think that the data shows that was still the right decision at the time. But now we are in the dealing with the fallout stage, and I mean the major central banks have so far done fairly well. The problem is now, there’s also been some rogue actors taking advantage of the situation, and reaping larger and larger profits, without recourse. If you look at the major telecoms (government protected), the major banks (government protected), the major airlines (largely government protected, and free to act without retribution due to the lack of government interest in doing so). The automakers (who are de facto government protected), the groceriers (government protected by way of no competition and a clear government aversion to act on what’s pretty clearly collusion and anti-competitive behavior). Basically there’s a common theme here, Canadian consumers are getting hosed. And that’s also driving inflation, and its only the government that can interfere and regulate, the central bank has no jurisdiction here.
The bank of Canada cant impose anything on groceries and retailers either. It’s going to take both parties to fight this fight.