The month of June is over, but we won't know how high
inflation was from Stats Can until July 20. In the US, the numbers drop on
the tenth (Department of Labour)!! Not all bad, Wall Street will have
digested the news by then.
So what can we expect for June. We are at a funny moment in the evolution
of things: even if the actual index numbers did not budge by one iota, we
would still be showing 7%+ inflation year-to-year. That is because there was not
that much mouvement at the same period last year; things only actually got
ugly in the last few months.
Apart from the end of the pandemic, and the war in Ukraine, there is another
player here: the Central Bank, and interest rates. Now that gas prices seem to be
stabilizing at this new high level, it makes sense that these higher prices would exhaust
themselves brining higher prices in the economy as a whole. which might then stabilize
in turn. But wait, what are the actual dangers of these aggressive interest hikes.
One thing that strikes me immediately is the fate of mortgage holders. My intuition tells
me that many otherwise sane and properous people migh be carrying housing payments
that - agreed to in times of extremely low rates - would put them in a default situation
now. They may be already paying the upper limit of what they can afford. Default, resell...
Businesses might be hesitant to invest and expand, small businesse - hairdressers, restaurants,
fast fashion - could be raising prices on their fragile customers ie students and the young.
In short, a lot less fun to be had by all.
And meanwhile, established workers furiously tempted to make higher wage demands.
Not to mention pressures on government to invest/donate in Defense spending A LOT.
All the ingresients for stagflation: low growth, high inflation.
So who is going to blink first and be reasonable so that we all normalize peacefully.
Not clear at this point.
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