{"id":36860,"date":"2018-08-20T08:29:26","date_gmt":"2018-08-20T13:29:26","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36860"},"modified":"2018-08-20T08:29:26","modified_gmt":"2018-08-20T13:29:26","slug":"toxic-mix-in-canada-spiking-inflation-variable-rate-mortgages-and-a-housing-bubble","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36860","title":{"rendered":"Toxic Mix in Canada: Spiking Inflation, Variable-Rate Mortgages, and a Housing Bubble"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2018\/08\/18\/inflation-interest-rate-mortgage-types-in-canada-house-price-bubble-variable-adjustable-fixed-rate\/\">Toxic Mix in Canada: Spiking Inflation, Variable-Rate Mortgages, and a Housing Bubble<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>What will the Bank of Canada do?<\/strong><\/p>\n<p>The Bank of Canada has nudged up its target rate four times, starting July a year ago, from 0.5% to 1.5%. It last hiked on July 11. But now it is facing inflation that suddenly and unexpectedly jumped at twice the Bank of Canada\u2019s current target rate.<\/p>\n<p>Canada\u2019s Consumer Price Index (CPI) rose 3.0% in July from a year earlier, the hottest since September 2011, <a href=\"https:\/\/www150.statcan.gc.ca\/n1\/daily-quotidien\/180817\/dq180817a-eng.htm?HPA=1\" target=\"_blank\" rel=\"noopener\">Statistics Canada<\/a> reported on Friday. Consensus expectation was a rise of 2.5%, same as in June.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-43893\" src=\"https:\/\/wolfstreet.com\/wp-content\/uploads\/2018\/08\/Canada-CPI-2018-07.png\" alt=\"\" width=\"472\" height=\"370\" \/><\/p>\n<p>Prices rose in all major components. Prices for services \u2013 the largest part of consumer spending \u2013 jumped 3.2% year over year, up from a 2.2% increase in June.<\/p>\n<p><ins class=\"adsbygoogle\" data-ad-client=\"ca-pub-8212587530282873\" data-ad-slot=\"1767955946\"><\/ins>In most provinces, CPI ran even hotter:<\/p>\n<ul>\n<li>Alberta : 3.5%<\/li>\n<li>Prince Edward Island: 3.4%<\/li>\n<li>Manitoba: 3.3%<\/li>\n<li>British Columbia: 3.3%<\/li>\n<li>Ontario: 3.1%<\/li>\n<li>Saskatchewan: 3.1%<\/li>\n<li>Newfoundland and Labrador: 2.7%<\/li>\n<li>Nova Scotia: 2.7%<\/li>\n<li>New Brunswick: 2.7%<\/li>\n<li>Quebec: 2.4:<\/li>\n<\/ul>\n<p>But no problem.<\/p>\n<p>Like the Fed and other central banks, the Bank of Canada has its \u201cpreferred\u201d measures of inflation. And they\u2019re a lot lower, of course. Which is the point. But unlike the Fed, it does not use a core index \u201cwithout food and energy.\u201d Instead, it has three measures (<a href=\"http:\/\/www23.statcan.gc.ca\/imdb-bmdi\/document\/2301_D63_T9_V1-eng.htm\" target=\"_blank\" rel=\"noopener\">definitions<\/a>) that have been statistically \u201ctrimmed:\u201d CPI-trim, CPI-median and CPI-common.<\/p>\n<p>Its stated goal is to keep inflation as measured by these three indices at the 2% midpoint of \u201can inflation-control range of 1% to 3%.\u201d And this is how these three indices stacked up in July:<\/p>\n<ul>\n<li>CPI-trim: 2.1%<\/li>\n<li>CPI-median: 2.0%<\/li>\n<li>CPI-common: 1.9%<\/li>\n<\/ul>\n<p>Statistically trimming the hot items out of an index works miracles, though it makes this trimmed index even more meaningless to consumers because consumers, who live in the the real world, cannot trim those items out of their budgets quite so easily. So now, after a proper trimming of the index, the BOC is right on target.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Toxic Mix in Canada: Spiking Inflation, Variable-Rate Mortgages, and a Housing Bubble What will the Bank of Canada do? The Bank of Canada has nudged up its target rate four times, starting July a year ago, from 0.5% to 1.5%. It last hiked on July 11. But now it is facing inflation that suddenly and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[942,103,172,406,426,431,4869,4254,4255],"class_list":["post-36860","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-canada","tag-cpi","tag-housing-bubble","tag-inflation","tag-interest-rates","tag-mortgage-rates","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36860"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36860\/revisions"}],"predecessor-version":[{"id":36861,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36860\/revisions\/36861"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}