Just right

Jul 17 20:07 2019 Print This Article

Not too hot. Not too cold. And don’t expect a rate cut anytime soon.

The latest inflation numbers, out Wednesday, show the Bank of Canada might actually know what it’s doing. As you recall, the central bankers decided last week not to cut rates, even as Trump beats his monetary guys into submission (a rate drop is still expected there in a few days). The official Ottawa stats confirm it’s different up here.

You may not believe it, but the cost of living increase is down to 2%. Yeah, I know everything you buy is way higher than last year, but that’s the spin. And it’s down considerably from 2.4% in the previous month.

Two per cent is right in the central bank’s target range. Below that (1%) and they worry the economy is languishing and needs some stimulus (I know the feeling). So they cut. Higher than this (3%) and they fret things are overheating and in need of a cold shower. Rates go up. Along the way financial markets react because the cost of money influences much. Stimulus means more economic activity, corporate profits and rising stocks, for example. And higher rates bolster the dollar, since money flows to where it can earn a better return.

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About Article Author

Greater Fool

Author, Garth Turner has been a member of the Canadian Parliamant for nine years, serving as Member of Parliament, Cabinet Minister (in charge of Canada Revenue Agency), national leadership contender (Progressive Conservative Party of Canada), House of Commons Standing Committee member and chairman (Consumer and Corporate Affairs, Finance), Special Advisor to the Leader of the Official Opposition. He is a member of the Privy Council of Canada. In addition, Garth is an ambitious entrepreneur – founder and CEO of Canada’s largest independent producer of network television, providing programming to CTV, Global, YTV and others. He founded and successfully operated chain of six community newspapers in Ontario as well as founded and operated eco-tourism and hospitality company aggregating and restoring heritage properties.

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