https://betterdwelling.com/canadian-rate-hikes-unlikely-as-inflation-the-economy-slows/ Canada’s Fastest Growing Real Estate News Source Wed, 18 Oct 2023 23:16:40 +0000 hourly 1 https://betterdwelling.com/canadian-rate-hikes-unlikely-as-inflation-the-economy-slows/#comment-92417 Wed, 18 Oct 2023 23:16:40 +0000 https://betterdwelling.com/?p=24142#comment-92417 Daniel speaks of a “base effect” being responsible for part of the drop in the 12-month inflation rate for the Canadian CPI from August (4.0%) to September (3.8%). At least this is better than StatCan’s own term, “bae year effect”, which is absolutely ridiculous, because we are dealing with a change from a base month of August 2022 to one of September 2022; there is no change in base year. StatCan seems not only to have succeeded in confusing others, but in confusing itself. It is really a rotating-out effect, as I wrote some years back, as the September 2022 monthly rate rotates out of the 12-month growth rate, or more simply an exit effect.
For this September update, the impact of the exit effect is more effectively illustrated with the CPI for gasoline than for the CPI All-items. The annual inflation rate for gasoline went from 0.8% in August 2023 to 7.5% in September 2023, an increase of 6.7 percentage points. The rule of thumb for estimating such changes is to take the difference of the monthly change entering the annual inflation rate and the monthly change exiting. Since the monthly inflation rate for September 2022 was -7.4% and for September 2023 was -1.3%, the difference would be (-1.3-(-7.4) percentage points or 6.1 percentage points. However, the exit effect is underestimated. If there were no change in gasoline prices in September 2022, the 11-month inflation rate for September 2022 to August 2023 would be equal to the 12-month inflation rate for August 2023. That 11-month inflation rate less the 12-month inflation rate is the appropriate measure for the exit effect. The exit effect then is 8.1 percentage points, about 0.7 percentage points larger than the negative of the monthly percent change for September 2022, as the exit effect was amplified by the substantial inflation in gasoline prices over the September 2022 to August 2023 period. The entry effect can be residually calculated but it can also be directly calculated if one chooses to do so.

]]> https://betterdwelling.com/canadian-rate-hikes-unlikely-as-inflation-the-economy-slows/#comment-92405 Wed, 18 Oct 2023 16:02:54 +0000 https://betterdwelling.com/?p=24142#comment-92405 The bond market is in charge, not the Bank of Canada, The bond rates are going up and the bond market is the base for are all interest rates

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