It’s been a long time since I provided an update on Canadian inflation journey. This was an interesting topic to write a blogpost on as the rate hikes and annual inflation directly impacted my personal finance. The rising borrowing costs translated to low cash which heavily affected my ability to invest in innovative crypto projects including Hive.
The inflation is slowing down in Canada. The Consumer Price Index (CPI) for October 2023 rose to 3.1% year over year. The rate was 3.8% in September and that means the inflation cooled down on a monthly basis. To be honest, there is no value in analyzing these monthly differences as the rate is far from the targeted inflation at 2%.
I am so overwhelmed and frustrated going through these numbers as I have been doing this for the last two years. I started taking a keen look at the predictions, forecasts and recording of CPI numbers, GDP and unemployment data. The governments and central banks are running the narrative of economic outlook based on these manipulated and stale data to make sure they have the policy they wanted.
The Canadian central bank has always been pretty sure that they want to take the inflation down to 2%. They raised the interest rate for 14 straight months to bring it from 0.25 to 6.25. Now, there is a risk of recession, as they say. While we are talking about recession, the data from the last three months suggested that we have strong labour market and the economic activities are not slowing down.
What’s the right narrative?
Are we tackling inflation or are we battling recession? The central bank in Canada is using one tool that they have in their disposal to run a balance walk on this tight rope 100 floors above the ground. Not sure they understand the assignment in hand.
The October data suggested that lower inflation is mainly due to the lower fuel price at the pump. The food inflation is also coming down for the third month in a row but I am yet to feel that at the grocery shops myself. It has not come down a bit for me.
Property taxes and other special charges, which are priced annually in October, rose 4.9% on a year-over-year basis, compared with a 3.6% increase in October 2022. The national increase in October 2023 was the largest since October 1992.
In Conclusion,
The Canadian central bank is facing a difficult challenge in maintaining a balance between tackling inflation and battling recession. With the inflation rate still above the targeted 2%, the bank has been raising interest rates to bring it down. However, there is also a risk of recession looming, which makes the situation even more complex. The central bank's data shows that lower inflation is mainly due to lower fuel prices, but some other costs, such as property taxes and special charges, have risen considerably. It remains to be seen what the right narrative is for the Canadian economy, but the data suggests that the labor market is strong and economic activity is not slowing down.