Happy Monday Morning! Inflation came in hotter than expected in April. Headline inflation ticked in at 4.4%, well above the 4.1% that was expected. It was the first month over month increase in the rate of headline inflation since June 2022. Naturally, panic ensured shortly thereafter.
Thank you for your post. Curious to know why you would factor in (or provide a calculation that strips out the 0.8%) interest on mortgages in inflation number but not factor in home price capital appreciation? Are you able to provide a hypothetical inflation number that factors in home prices inflation over the last few years? Would be very interesting.
Mortgage interest costs are one of the ways by which Canada's CPI factors in the cost of shelter, and one of the reasons that inflation was so _low_ immediately after the pandemic. That mortgage interest costs are contributing to inflation now simply means that over the long term, housing price growth cannot remain decoupled from CPI inflation, and the Bank of Canada now has to come to terms with the last two decades of capital appreciation. It's going to be a long-lasting headache.
Thank you for your post. Curious to know why you would factor in (or provide a calculation that strips out the 0.8%) interest on mortgages in inflation number but not factor in home price capital appreciation? Are you able to provide a hypothetical inflation number that factors in home prices inflation over the last few years? Would be very interesting.
Mortgage interest costs are one of the ways by which Canada's CPI factors in the cost of shelter, and one of the reasons that inflation was so _low_ immediately after the pandemic. That mortgage interest costs are contributing to inflation now simply means that over the long term, housing price growth cannot remain decoupled from CPI inflation, and the Bank of Canada now has to come to terms with the last two decades of capital appreciation. It's going to be a long-lasting headache.