Today, Statistics Canada reported inflation of 1.1% for August, even lower than June and July. But even at this anemic level, inflation is eating up three-quarters of wage gains. The Labour Force Survey indicates that Canada’s average hourly wage rose by only 1.5% between August 2012 and August 2013.
Subdued inflation and the weak job market both argue for the Bank of Canada to keep interest rates low. The rationale to hike interest rates would be to quell inflation, which is little more than half of the central bank’s 2% target.
The rationale for low interest rates is (Read more…)
Today, Statistics Canada reported an annual inflation rate of 1.3% for July. By comparison, it reports that the average hourly wage rose by 1.8% between July 2012 and July 2013.
In other words, even anemic inflation is eating up nearly three-quarters of wage increases. On average, Canadian workers have eked out only a 0.5% improvement in purchasing power over the past year.
Low inflation and the weak job market both argue for the Bank of Canada to keep interest rates low. The rationale to hike interest rates would be to quell inflation, which is already under control (Read more…)
Today, Statistics Canada reported an inflation rate of 1.2% for June, validating the Bank of Canada’s recent decision to keep interest rates low for the foreseeable future. The rationale to raise interest rates would be to curb inflation, which is already under control and well below the central bank’s 2% target.
But even at 1.2%, inflation eats up more than half of wage gains over the past year. The Labour Force Survey indicated that the average hourly wage rose by just 2.2% between June 2012 and June 2013.
Governments should be trying to foster a wage-led recovery (Read more…)
Statistics Canada reported today that inflation collapsed to just 0.4% in April. The Bank of Canada’s core inflation rate, which excludes volatile items, fell to 1.1%.
Continued low inflation does not provide a rationale to raise interest rates. Perhaps for that reason, Canadian monetary hawks have shifted their rationale for higher interest rates.
In 2011, the C. D. Howe Institute released a paper entitled Overnight Moves: The Bank of Canada Should Start to Raise Interest Rates Now. It argued:
If more ‘no-change’ decisions are made by the Bank of Canada regarding its policy interest rate, inflation expectations might (Read more…)
1. He’s Number Two: Stephen Poloz was widely acknowledged in economic and political circles as the second-best choice for the top job at the Bank of Canada. So the surprise was not that he was chosen. The surprise was, Why Not Tiff Macklem? Will someone please find out and tell the rest of us?
2. Doctrinaire [or not?] on Inflation Targeting: He thinks it’s “sacrosanct.” Having studied with monetary policy guru David Laidler at the University of Western Ontario, and been part of the Bank of Canada team that brought inflation targeting to a neighbourhood near (Read more…)
Here is my take from today’s Economy Lab in the Globe.
To expand a bit on alternatives, my take is that the neo liberal turn at the end of the 1970s was one possible response to the stagflation crisis, which found mainstream Keynesian economics wanting.
Left Keynesians such as Kalecki had long recognized that full employment capitalism with strong unions could lead to low profits, low growth and inflation, and the argument vis a vis the UK was advanced by Marxists such as Glyn and Sutcliffe.
The answer – as in the Meidner Plan in Sweden and the Alternative Economic
. . . → Read More: The Progressive Economics Forum: Margaret Thatcher’s Economic Legacy
I was talking to one of my friends around the the university the other day and I brought up Raj Sherman’s interview in the Calgary Herald on some form of cooperation between the two Liberal parties in Alberta. It was an off-hand comment and I didn’t really expect a conversation to come of it. He [...]
Economists say no, but as I drink my McD’s coffee this morning at the community centre, I must say I’ve been noticing a lot of “rounding up”, and not too much in the way of “rounding down”.
120% of the wealth created since the economic crisis began in 2007 has gone to the top 1% – meaning, the bottom 99% have fallen and have lost real income to the richest 1%. (Turn off “the news” and watch the Keiser Report for the real facts, or see Gerald Celente or Michael Hudson.) 20% [...]
Mark Carney’s tenure as Governor of the Bank of Canada overlaps some challenging economy history. Appointed in early 2008 just as the US housing bubble was popping, Carney took the helm in time for a financial crisis that brought the global economy to its knees. We are still living that history in terms of a [...] . . . → Read More: The Progressive Economics Forum: Mark Carney’s tenure and the state of monetary policy
Statistics Canada reported today that, for a third consecutive month, consumer prices declined and the inflation rate fell below 2%. In July, the inflation rate was 1.3% and the Bank of Canada’s core rate was 1.7%.
Gasoline and natural gas prices, which have been lower this summer than last, dragged down the overall Consumer Price Index. However, there is little indication of inflationary pressure anywhere.
Even those categories with the largest price increases were in line with the Bank of Canada’s 2% target. Food prices and household expenses rose 2.1% over the past year. The inflation rate
. . . → Read More: The Progressive Economics Forum: Prices Decline Yet Again
Today’s Consumer Price Index provides further evidence of Saskatchewan’s rising cost of living. Among the provinces, Saskatchewan is tied for the second-highest annual inflation rate: 2.0%.
Consumer prices decreased in June from May in nine provinces (all except Alberta). But Saskatchewan was tied for the smallest monthly price decline: -0.3%.
Compared to the rest of Canada, Saskatchewan residents experienced nearly the largest increase in the cost of living over the past year and received a relatively small break last month.
The provincial government’s proposed labour law changes threaten to weaken the ability of workers to collectively bargain
Today’s report that the national inflation rate fell to 1.2% in May deflates calls for higher interest rates to reduce inflation. The central bank’s core rate was 1.8%, also below the 2% target.
The other argument for an interest-rate hike was to moderate mortgage lending and the housing market. However, the federal government’s move to reign in mortgage lending through the Canada Mortgage and Housing Corporation removes the pressure for the Bank of Canada to do so through monetary policy.
An important reason to keep interest rates low is to avoid upward pressure on the Canadian dollar, which
Today, Statistics Canada reported an annual inflation rate of 2%, precisely in line with the Bank of Canada’s target. With inflation under control and renewed risks to the global economy, there is little rationale for the central bank to raise interest rates anytime soon.
In fact, the Bank of Canada should now be more concerned about the exchange rate than the inflation rate. Recent debate about Dutch disease highlights the Canadian dollar’s overvaluation.
While the loonie trades for about 98 U.S. cents on financial markets, the OECD calculates that its real purchasing power is equivalent to only 76 U.
. . . → Read More: The Progressive Economics Forum: Inflation On Target; Exchange Rate Off Target
Canada’s business press has recently been filled with speculation that the Bank of Canada may soon hike interest rates based on its somewhat more optimistic economic outlook. But today’s Consumer Price Index report indicates that there is no need to raise interest rates. Statistics Canada reported that both headline and core inflation fell to 1.9% in March, slightly below the central bank’s 2% target.
Higher interest rates are not warranted to combat already low inflation, but could derail Canada’s fragile economic recovery by increasing borrowing costs and driving up the overvalued loonie. The latest OECD data on purchasing power
. . . → Read More: The Progressive Economics Forum: Deflating the Monetary Hawks
Statistics Canada reported today that consumer prices edged up by 0.1% in February on a seasonally-adjusted basis, bringing the annual inflation rate to 2.6% and the core inflation rate to 2.3%. These rates are within the Bank of Canada’s target range and should allow it to keep interest rates low, which would be appropriate given Canada’s stalled labour market.
The Labour Force Survey indicates that the average hourly wage rose at an annual rate of 2.0% to February. Working Canadians are not keeping up with the cost of living.
While the national totals changed little in
. . . → Read More: The Progressive Economics Forum: Inflation Central
Assorted content to end your week.
- Susan Riley brilliantly slams the message that austerity is necessary for everybody but those who already have the most: Is anyone else getting tired of being lectured about austerity by wealthy consultants in expensive suits who charge $1,500 a day for their advice and have comfortable government pensions, besides?
And do we really need another warning about saving for old age – instead of frittering away money on escalating tuition for our children; or scrambling to compensate for unexpected job loss, or medical expenses – from disapproving cabinet ministers with fat salaries and
. . . → Read More: Accidental Deliberations: Friday Morning Links
Statistics Canada reported today that consumer prices jumped in January (by 0.4% or 0.5% seasonally-adjusted), offsetting the drop in December. As a result, the annual inflation rate is now 2.5% and the Bank of Canada’s core inflation rate is 2.1%.
Both measures are well within the central bank’s target range, which should allow it to keep interest rates low and perhaps reduce them further if unemployment continues to rise. Since the last inflation report, the US Federal Reserve has pledged to keep its target rate near zero through 2014, providing a further argument for
. . . → Read More: The Progressive Economics Forum: Inflation and Drummond
The top story in the Globe and Mail today reports on something I warned about a year ago: Statistics Canada is making changes to the way it calculates the Consumer Price Index.
At that time I suspected changes to calculations of the CPI would be introduced as part of the renewal of the inflation target with the Bank of Canada, and they were clearly planning it at the time, but wanted to keep it under wraps.
While these changes may seem like obscure “refinements”, they could eventually lead to billions of dollars in lower payments from the federal and
. . . → Read More: The Progressive Economics Forum: Recalculating inflation: billions in savings for governments and employers paid for by workers and pensioners
Statistics Canada reported today that consumer prices decreased in December, lowering the annual inflation rate to 2.3%. The Bank of Canada’s core inflation rate declined to 1.9%.
Tame inflation leaves room to lower interest rates. If unemployment continues to rise, the Bank of Canada should reduce interest rates to boost the economy and create jobs.
The modest inflation rate still exceeds the 2.2% average increase in hourly wages. Sluggish wage growth is another sign of a weak labour market, which calls for stimulative fiscal and monetary policy.
Although the overall price level decreased, shelter costs
. . . → Read More: The Progressive Economics Forum: Lower Inflation Frees Carney’s Hand
The December issue of the quarterly Economic Climate for Bargaining publication I produce is now on-line. This issue has a number of pieces on issues of inequality, including:
Rising inequality is hurting our economy Labour rights, unions and the 99% Canadian economy bleeding jobs; public sector cuts to intensify Recession and cuts hit Aboriginal and racialized workers hardest
It also has sections with summaries of Canadian and provincial forecasts of main economic indicators, and discussions of developments in inflation and wages increases by major sector and province. It picks up on a number of discussions that have taken place
. . . → Read More: The Progressive Economics Forum: Economic Climate and Inequality
Statistics Canada reported today that the annual inflation rate remained 2.9% and the Bank of Canada’s core rate remained 2.1% in November.
The monthly increase in consumer prices slowed to 0.1% in November from 0.3% in October. The monthly increase in core prices slowed to 0.1% in November from 0.2% in October.
Inflation remains modest and should not deter the Bank of Canada from keeping interest rates low, and perhaps reducing them, to support our fragile economy and labour market.
However, even this modest inflation exceeds the small pay increases received by Canadian workers.
. . . → Read More: The Progressive Economics Forum: Modest Inflation Outstrips Wages and Canada Social Transfer
Here are some followup comments that supplement my last post.
The emerging picture of the Canadian economy is bleak. Inscribed as every government in the Western world is in neoclassical economic policy that shapes the global economy, the blame can be easily spread around, but our own government could be combatting the situation meaningfully with different policies instead of just going along with mainstream economic theory that privileges the financial sector over the real economy and austerity over job creation in the mistaken belief that that sector drives the industrial economy.
First some relevant remarks from Jim Stanford’s post about
. . . → Read More: Politics and Entertainment: Jobs Waning, Debt Mounting, Wages Slipping: A Bleak Outlook
Many long-held tenets of neoclassical orthodoxy have fallen by the wayside in the past 3 years, but perhaps one of the biggest dominos that is at least teetering precariously (if not fully tipped over) is the consensus that inflation targeting should be the exclusive focus of monetary policy.
The policy was closely associated with the so-called “New Consensus in Macroeconomics” — the premature and presumptuous claim that rational-expectations-augmented analysis had produced the “end of history” in macroeconomics (analogous to Francis Fukuyama’s preposterous claim about global politics). The idea was that by anchoring inflation expectations at the target, the central
. . . → Read More: The Progressive Economics Forum: Inflation Targeting and the Crisis