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Canada's inflation rate slows to 3.4%, lowest level in almost 2 years (www.cbc.ca)
submitted 3 years ago by to c/canada@lemmy.ca
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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.

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[–] 32 points 3 years ago* (13 children)

Maybe it's time for the Canadian government to now focus on what's actually causing inflation, instead of jacking up interest rates quarter over quarter. Maybe go after the grocery and gasoline retailers for their quite clearly collusive behaviour. Because putting my mortgage up another $1,000 a month isn't going to fix that.

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  • [–] 29 points 3 years ago (5 children)

    The Canadian government does not control the bank of canada

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  • [–] 5 points 3 years ago (1 child)

    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.

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  • [–] 3 points 3 years ago

    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.

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  • [–] 6 points 3 years ago (1 child)

    Pretty much. Interest rates are a blunt tool. I'm worried we're drifting into stagflation.

    Taking your example of housing, raising interest rates just makes it more expensive to own homes and to build homes. People have to live somewhere, and there isn't really any surplus housing. This makes it harder to downsize to reduce housing costs.

    So much of what's driving inflation is outside of our control, but not necessarily beyond our influence.

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  • [–] 4 points 3 years ago

    I disagree with the assumption that there isn't any surplus housing, unless proven by a study. The only people I've seen actually pushing numbers on that have been ones with a vested interest in keeping housing prices high. My street is full of empty/for sale houses owned by speculators.

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  • [–] 4 points 3 years ago*

    This is one of those cases where average inflation has decelerated, but consumers' experience of inflation remains unchanged - cost on stuff that the average consumer isn't using has gone back down, while cost on stuff we're buying remains inflated.

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  • [–] [S] 2 points 3 years ago (1 child)

    In some ways it will because now your disposable income will be reduced thereby crimping your ability to spend on consumer goods. You have to remember that the last time housing pricing went through the roof decades ago, BOC jacked up interest rates in order to bring prices back to earth and yes home owners who bought at the wrong time did suffer. These historically low interest rates are as much to blame for the housing price increases as the lack of new builds supply due to restrictive regulations and zoning policies. If we are to solve the affordability problem, housing prices will have to decline. Housing as the main wealth creation tool for the upper middle class of Canada and as a big driver of the economic growth has undesirable consequences that we are facing now.

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  • [–] 4 points 3 years ago

    I think treating housing as an investment, not a necessity has guided so many policy decisions over the decades leading to this. For sure, housing is only one component of inflation, but it is a component that is directly within the Federal governments ability to strongly influence.

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