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May 14, 2021 | CPI Surge Pushes Interest Rates Higher
Hilliard MacBeth Author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash
This week the CPI index in the U.S. hit a new high for this cycle with a 4.2 percent gain from a year ago.
Most central bankers claim that they are happy to see inflation move higher, as they want to stimulate the economy.
But economists for decades have been trained to focus on inflation expectations, a measure which is hard to reign in once it starts to move higher.
Can central banks keep interest rates below 1 percent with inflation above 4 percent?
April 30, 2021 | The Fed Pushes for More Inflation
Hilliard MacBeth Author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash
The US Federal Reserve stayed the course on Wednesday April 28, 2021 by continuing its policy of fighting deflationary forces, even at the risk of inflating asset bubbles in housing and stocks.
Its stated goals are maximum employment and inflation averaging 2 percent.
Will Fed policies unleash out-of-control inflationary expectations?
Source: Bloomberg
Chair Jerome Powell held a press conference after the announcement of no change in its zero-interest rate stance and continued aggressive quantitative easing (QE).
Powell was sworn in as Fed chair in February 2018 after being appointed to the Fed by Barack Obama in 2011. His first actions in 2018 were to raise interest rates and to start to taper the policy of QE. But when asset prices, especially the stock market, collapsed in December 2018 he quickly reversed course by ending hi
April 23, 2021 | The Bank of Canada risks a taper tantrum
Hilliard MacBeth Author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash
The Bank of Canada announced this week that it will reduce buying of government bonds during this pandemic recession. The Bank had been buying most of the bonds issued by the government during the pandemic spending spree which created a $350 billion deficit.
The Bank of Canada now owns 40 percent of all government bonds outstanding.
In 2013 the US Federal Reserve tried to exit a similar quantitative easing program. The bond market threw a tantrum, which became known as the taper tantrum.
April 16, 2021 | Central Banks are Nervous as CPI Soars
Hilliard MacBeth Author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash
Rapid inflation reared its ugly head this month, as the Consumer Price Index hit 2.6 percent gain for the last year.
The price increase for energy was closer to 15 percent, while food was almost 4 percent.
If the CPI keeps rising at this pace, as some predict, interest rates will rise.
What will central banks do if inflation goes well above 3 percent?
The Consumer Price Index for All Urban Consumers, headline CPI, jumped 2.6 percent year-over-year. Of course, last year in April the price of oil on the commodity futures market hit a record low of minus 37.63 dollars. OPEC, maybe a little terrified, agreed to cut 10 million barrels per day of production.