this post was submitted on 06 Sep 2023
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Bank of Canada holds interest rate steady at 5% (www.cbc.ca)
submitted 1 year ago by sbv to c/[email protected]
21 comments fedilink hide all child comments
 

Welp. Interest rates are staying steady (at least) until the next announcement in October.

I don't feel like inflation has decreased. Housing is still exorbitant. But there haven't been mass layoffs, so we've got that going for us.

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[–] [email protected] 17 points 1 year ago* (last edited 1 year ago) (2 children)

I don't know, I think the price hikes have stopped, but the sticker shock from the past price hikes remains. That by definition is the end of de jure inflation.

The real scary problem that smart economists are pointing at is that now the prevailing rent for available units is horrifying -- not the rent most people are paying, but the rent they'd pay if they moved today. Most people who are in rent-controlled units or just have friendly landlords don't know how bad it will be if they have to start looking again. That's a ticking time-bomb, one that a landlord can detonate prematurely with a renoviction.

[–] [email protected] 4 points 1 year ago

The pressure on rentals has potential to become MUCH worse too if the interest rates start pushing people out of their current owned homes.

I'm a home owner. I am looking at a mortgage renewal in about 18 months. At the current interest rates I'm facing a painful mortgage payment hike. Can I manage it without extending my amortization period? Yes... painful, but yes. I can absorb the increase because I intentionally bought in a (at the time) marginally lower COL area at less than 50% of what I qualified for. Most people I know who bought around the same time went right to the max and they are screwed at renewal if rates don't drop by a substantial amount. In some cases they will be forced into extending their mortgages well beyond 30 years or forced to sell... if they sell, they have to live somewhere... they will transition to renting...

[–] sbv 1 points 1 year ago (1 children)

As of July, grocery inflation was still up over 8%. Sure, it's slowing, but that's a significant increase in costs for most Canadians.

[–] [email protected] 2 points 1 year ago* (last edited 1 year ago)

The good news is that it's just the delayed response to the 2021/2022 food production seasons, which saw the farm gate price go to the moon – or maybe more like Alpha Centauri. Major weather-related crop loss in 2020, followed by Europe shutting down fertilizer plants in 2021, and Russia invading Ukraine in 2022 was not kind to food buyers. You didn't have to pay then, but the piper has to be paid eventually.

The farm gate price has moderated substantially this year. Food and fertilizer stocks are returning, and we have a better understanding of what is going on in Ukraine. As such, food off the farm is now only worth a fraction of what it was. As food is mostly secured on futures contracts, the grocery store buyers are still living in 2021/2022, but the price will come down for them too once the consumer catches up with newer contracts.

Same as usual.