Inflation is cooling. The cost of living crisis is not
Inflation is cooling. The cost of living crisis is not
Inflation cooling is "things getting worse, less fast", not "things returning to how they were."
Seeing as the government considers deflation to be not an option, the only practical fix to the crisis is a general wage gain across the entire workforce equivalent to the inflation we've been seeing the past couple of years. More, really, seeing as inequality had been growing prior to the pandemic as well. Prices are not going to go down. And if deflation is threatening to occur, the government will move heaven and earth to stop that from happening. Ergo, wages need to go up.
Or maybe we could move away from this irrational system, but one step at a time, I suppose.
In the US, the fed's stated strategy is to keep wages down. It does not have a lot of tools to deal with inflation, so it raises interest rates to inhibit growth until inflation is under control- the "soft landing." Legislation is needed in order to handle this problem, because wages will quickly be absorbed by increasing prices unless we can capture corporate profits with progressive taxation. I imagine the situation is similar in Canada but I'm not well aware. Remember to vote.
In the US, the fed’s stated strategy is to keep wages down.
It's not their stated strategy but it's probably safe to assume they subscribe to the baseless "wage price spiral." The bottom line is that there is still a LOT of stimulus money circulating, keeping inflation high. Ideally this would be targeted with a tax on the wealthy, but in the absence of that, the Fed has to use their very blunt tools. I don't see inflation improving until there's a recession.
Inflation isn't cooling... the government is just trying to say it is.
This is the best summary I could come up with:
"We have seen the annual rate of inflation has started to come down, but that doesn't mean that the level of prices is not [still] unaffordable for a lot of people," said CIBC senior economist Andrew Grantham.
Rents may now be the biggest concern on the Canadian inflation front," wrote BMO's chief economist Douglas Porter.
August to September data highlights how impactful even a minor rate increase is on affordability," said James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender.
Consumers and especially businesses surveyed by the Bank of Canada say the full weight of all those rate hikes has yet to fully hit the economy.
Karl Schamotta, the chief market strategist of the financial payments company Corpay, says many experts believe Canada is headed for a soft landing (a scenario where the economy slows enough to get inflation under control but not so much that it slips into a recession).
Grantham says if we really are through the worst of the inflation crisis, then maybe the Bank of Canada can start gradually lowering borrowing costs.
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Grantham says if we really are through the worst of the inflation crisis, then maybe the Bank of Canada can start gradually lowering borrowing costs.
Pretty much no central bank ever lowers rates early enough to prevent a recession. The US has been teasing the tip of one for a year now, with rates going up. By the time they react and lower rates it will be way too late.