It was predictable that it would happen – yesterday was the day when the Consumer Price Index figures are publicly released, and for the past few months, this has turned into a political gong show. Why? Because the Conservatives have decided to misconstrue what the data shows and to light their hair on fire about the top-line figure and wail that we’re in a “cost of living crisis.” Which is false – inflation is running hot for everyone right now, not just Canada, as a result of economies re-opening and global supply chains being disrupted by the pandemic, which affects prices, on top of the fact that there is some distortion in the year-over-year figures as a result of last year’s price crash. And to add to that, much of what is driving the July numbers are higher gas prices – which is a global issue, and good for Alberta’s economy – and higher housing prices, which is a driven by a lot of different factors. And hey, clothing and food prices were down, so there are upsides, right?
Relative high rates have mainly been due to lower prices earlier in the pandemic. July 2021 marks the first time price levels exceeded their pre-COVID trend (by modestly). pic.twitter.com/vrwT2D7b0x
— Trevor Tombe (@trevortombe) August 18, 2021
Notice that shelter costs rising recently is a large contributor to recently higher rates of inflation. For details on what's behind that, see this handy document: https://t.co/vTL8yiG8y2
TL;DR: lots of stuff behind it (rent, utilities, mortgage interest, and more).
— Trevor Tombe (@trevortombe) August 18, 2021
And to strip out the random ups and downs in different goods, the Bank of Canada uses various approaches. Here's their three preferred rates of inflation. All rising recently. But, interestingly, their trimmed-CPI measure exceeded 3% for the first time since 1991. pic.twitter.com/yg2ubsc6Hi
— Trevor Tombe (@trevortombe) August 18, 2021
The problem, of course, is that this is being politicised – wildly so. When it came up on the campaign trail, Trudeau said that he was going to let the Bank of Canada do their job and worry about monetary policy while he worried about families, but this was truncated in the reporting, and which also got trimmed into Conservative shitposts, and O’Toole was given fresh cause to decry the “crisis.”
https://twitter.com/LindsayTedds/status/1428104169009909763
Of course, O’Toole isn’t proposing any solutions that actually deal with inflation (and his plans will actually make it worse), but if he wants to start banging on about it and monetary policy, then he needs to start talking about what he thinks the Bank of Canada’s mandate should be – especially as that mandate is coming up for renewal. Should they continue to target inflation between one and three percent? He seems to sound like he wants them to target deflation, so good luck with letting the economy grow under that kind of mandate. Parliament should have this kind of discussion, but they need to actually have it – not just talking points and shots taken that assume people are ignorant about what it means. And the reporters on O’Toole’s campaign need to step up and start asking him these questions rather than just typing up his talking points.
https://twitter.com/LindsayTedds/status/1428094182531510282
https://twitter.com/MikePMoffatt/status/1428096342342213637
Are you saying that the Bank's mandate should be changed? If so, what should it be?
— Stephen Gordon (@stephenfgordon) August 19, 2021