For years, the Bank of Canada has been warning about the risk to inflation from wage increases outpacing price hikes. Now, the bank has provided new data to back up its warnings. The Bank’s most recent quarterly report on inflation, released last week, shows that, from May to August, the Consumer Price Index increased by just 1.6 per cent. That’s well below the Bank’s long-term target of 2 per cent.
The latest inflation reading from Statistics Canada showed that the consumer price index rose 0.5% in July, from June’s figure of 0.4%. That’s the most since December and the strongest reading in three months. The CPI hit a 3-month high of 2.0% in June, but fell back to 1.8% in July. The core (not seasonally adjusted) CPI also rose to 1.9% in July, matching a May record and the highest reading since November. The Bank of Canada (BoC) has the mandate of keeping inflation in a range of 1% to 3%. The BoC says the economy is recovering, but notes that a firmer inflation reading might make it more difficult
For the past two years, the Bank of Canada’s inflation numbers have been strong, even though the economy has been weak. And with inflation rising in a weak economy, some wonder if the central bank might raise its key interest rate after all. That’s unlikely, but the new numbers may explain why BoC governor Stephen Poloz held off.. Read more about why are the prices of things going up and let us know what you think.
Used vehicle costs have risen, while new car manufacturing has been delayed due to a chip shortage. Credit… The New York Times’ Rong Xu contributed to this article.
Consumer prices are expected to have risen at a breakneck pace in July, another month of exceptionally fast increases that may irritate Federal Reserve officials and represent a political risk for the Biden administration.
The Consumer Price Index will be released by the Bureau of Labor Statistics at 8:30 a.m. on Wednesday. According to analysts polled by Bloomberg, the inflation gauge likely rose by 5.3 percent last month compared to a year ago, and 0.5 percent from June.
It would be a slowing of the rate of rise — the C.P.I. increased 5.4 percent from a year ago in June, and 0.9 percent from May — but still a fast annual and monthly growth compared to what is normal.
Price increases were generally anticipated to start again this year following a dip in 2020, but the magnitude of the increase surprised economists. Yearly price increases will almost certainly decrease in the coming months as a data anomaly that has been exaggerating them disappears (more on that later).
Monthly increases are also likely to slow as companies discover methods to deal with short-term supply chain problems, which have pushed used vehicle prices substantially higher and contributed to a large portion of the 2021 increase.
But the Fed’s and the White House’s main concern is how fast this will occur. Temporary price spikes are acceptable to the Fed, which is tasked with maintaining price increases modest and consistent over time. However, if consumer and business habits change, price increases might remain high indefinitely, which would be a concern. Increasing expenses have created a political problem for the White House, as Republicans exploit them to accuse the Biden administration of mismanaging the economy.
Here’s everything you should know before diving into Wednesday’s report.
The CPI is not the Fed’s preferred metric. The central bank targets for an average annual inflation rate of 2%, which it calculates using the Personal Consumption Expenditures index, which has risen this year but not as strongly as the measure due out on Wednesday. However, since the C.P.I. is more immediate and its data flows into the Fed’s measure, it is carefully scrutinized.
The increase isn’t just due to the increased base. The so-called base effect was a major factor in this year’s improvements. When the economy was shut down last year, prices for plane tickets and restaurant meals fell, thus the rise in today’s pricing seems to be disproportionate.
However, the base impact is already diminishing, since prices began to recover when the economy reopened in May 2020. This varies depending on how it’s measured, but the base impact is anticipated to account for around 0.7 percentage point of the projected 5.3 percent increase in prices in July. The base effect is responsible for around 1 percentage point of the previous months’ increase and 1.4 percent of May’s gain.
The reason for the rise is because of the epidemic. The White House likes to note up that a large portion of the price rise has come from a few categories that have seen some unexpected reopening-related anomalies. For example, secondhand vehicle prices have risen while a chip shortage has caused new car manufacturing to be delayed. Beginning with this month’s report, analysts at TD Securities anticipate the trend to slow.
After falling during the downturn, airfare and hotel costs have also risen and are slowly returning to normal.
The jump hasn’t been very large. While a few categories of products and services have exploded in price, this does not mean that everything has gone up in price. The Federal Reserve Bank of Dallas provides a “trimmed mean” inflation estimate, which excludes the categories with the largest monthly gains or reductions. After removing outliers, the indicator indicates that inflation is still hovering around 2%.
People are waiting to see whether measurements of key, long-term inflation categories begin to rise more steadily. For example, if housing-related expenses rise as a house price slump leaks into rentals, inflation may continue to rise.
If rapid inflation continues, it will become a serious issue. On a teleconference with reporters on Tuesday, Charles Evans, president of the Federal Reserve Bank of Chicago, stated, “The issue is more — what the inflation forecast is going to be into the next year, 2022, 2023.”
Officials at the Federal Reserve are keeping an eye on pay growth and inflation expectations to see whether the recent burst of reopening-driven inflation will last. Employers may discover that they need to charge more to cover their costs if pay continues to rise. Similarly, if customers and companies begin to anticipate fast price rises, they may be more ready to accept higher prices, causing a self-fulfilling prophecy to occur.
Officials do not anticipate this to happen at this time.
In a recent press conference, Fed Chair Jerome H. Powell remarked, “My best judgment is that this is something that will pass.” “It’s a tremendous jolt to the economy that will be felt.”
Ben Casselman contributed to this story with his reporting.
Senator Rand Paul of Kentucky was barred from posting on YouTube for a week after releasing a video that propagated disinformation about Covid-19. Credit… Getty Images/Anna Moneymaker
Senator Rand Paul of Kentucky was banned from posting for a week on Tuesday after he uploaded a video disputing the efficacy of using masks to prevent the spread of the coronavirus for the second time.
The Republican senator’s statements in the three-minute video, according to a YouTube representative, were in violation of the company’s policy on Covid-19 medical misrepresentation. Videos that promote disinformation, such as “claims that masks do not have a role in preventing the contraction or transmission of Covid-19,” are prohibited by corporate policy.
“Regardless of speaker or political beliefs, we apply our rules uniformly throughout the platform, and we make exceptions for films with extra information, such as opposing views from local health authorities,” the spokesman said in a statement.
“Most of the masks you buy over the counter don’t work,” Mr. Paul adds in the video. They don’t protect you from infection.” “Trying to influence human behavior isn’t the same as following the real research, which tells us that fabric masks don’t work,” he says later in the film.
Masks do, in fact, effective, according to public health experts’ near-unanimous recommendations.
Representative Marjorie Taylor Greene, a Republican from Georgia, was banned from Twitter for seven days on Tuesday after she said the Food and Drug Administration should not grant the coronavirus vaccinations full clearance and that the vaccines were “failing.”
Mr. Paul defended his ban on Twitter, calling it a “badge of honor” and blaming it on “left-wing cretins at YouTube,” while providing a link to another site where the video could be seen.
The senator said in a statement that private businesses had the right to refuse him access, but that YouTube’s move was “a continuation of their determination to operate in lockstep with the government.”
“I believe that this kind of restriction is very hazardous, tremendously anti-free speech, and genuinely anti-science development, which requires skepticism and debate to get the truth,” he added.
Last Monday, YouTube took down an eight-minute Newsmax interview in which the senator said that wearing masks had “no value.” According to YouTube rules, a first violation results in a warning, and a second offense results in a weeklong ban as part of the company’s “first strike” reaction.
If there are no further infractions within 90 days, the strike will be erased from his account. A second strike within 90 days would result in a two-week suspension, while a third strike would result in the account being permanently banned.
Commonwealth Fusion Systems in Cambridge, Massachusetts, is led by plasma scientist Bob Mumgaard. Credit… The New York Times’ Tony Luong
A gadget for testing strong magnets, which Commonwealth believes will lead to the development of a viable fusion reactor. Credit… The New York Times’ Tony Luong
Despite decades of research and development, scientists have failed to develop fusion devices that produce more energy than they use. However, a super-strong magnet now being developed may pave the way for what experts think could ultimately be a fusion reactor. READ THE ENTIRE ARTICLE
Before a Manchester United match in March, Marcus Rashford kneeled in support of the Black Lives Matter campaign. For the racist comments he has received, he has called out “humanity and social media at its worst.” Credit… Powell/Pool/Pool/Pool/Pool Reuters has the story.
On Wednesday, Instagram will launch new tools to make it more difficult to see racist content.
One of these, according to Ryan Mac and Tariq Panja of The New York Times, would allow users to conceal potentially abusive comments and messages from accounts that don’t follow or recently followed them.
The measures come after an almost two-year effort by English soccer to put pressure on Facebook and other social media firms to stop online hate speech directed at its players.
Since then, soccer authorities have met with the platforms many times, issued an open letter asking for reform, and coordinated social media boycotts. Employees at Facebook have joined the protest, asking that the company do more to halt the abuse.
In a statement, Karina Newton, Instagram’s global director of public policy, stated, “The sad truth is that addressing racism on social media, like tackling racism in life, is difficult.” “We’ve achieved significant progress, many of which have been fueled by our conversations with groups that have been subjected to abuse, such as the football community in the United Kingdom.”
However, Facebook officials privately admit that racist remarks against English soccer stars are likely to persist. In an internal email obtained by The Times last month, Steve Hatch, Facebook’s director for Britain and Ireland, wrote, “Nothing will solve this issue quickly.”
July inflation was up 0.2% – more than expected – compared with June’s 0.6%, according to Statistics Canada’s latest inflation report. But this is not a big change from last month’s 0.7% rise, so the Bank of Canada can probably rest easy.. Read more about inflation items and let us know what you think.
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