Canadian Personal Finance Blog

Archive for the ‘Inflation’ Category

Harder Faster

That is actually one of my favorite April Wine albums, but unfortunately it is also the message the C.D. Howe Institute is pushing for Interest Rate increases this year in their report How Soon? How Fast? Interest Rates and Other Monetary Policy Decisions in 2010.

The report itself is a very interesting read on how and why things have happened in terms of credit and interest rates, however, there is a nasty little recommendation that is in it:

When the overnight rate does begin to rise, the changes must be as aggressive as the rate cuts of 2008 and 2009 with increases of 50 basis points at every announcement date until mid-2011 not seeming unrealistic.

Remember how quick and dramatic the rate cuts were last year? There may be an equal and opposite reaction in terms of speed and rate increase this summer and into 2011, which will cause a tightening of credit and tumult in the bond markets too.

Were you planning on renewing your mortgage, or getting a new one? Might be time to lock into whatever rate you can find now, if you need to, since it seems we are in for a bumpier ride in the interest rate world.

And The Winners Are

Yes there were 10’s of entrants to get the free copies of Quicktax, and the winners are:

• • • 2Hirondelles, who was selected by my son from my lucky Pittsburgh Steelers hat.
    • JohnnyG, who was selected by my wife from that same lucky hat!

I will be contacting you via e-mail on how you would like to receive your free software. Congrats to all entrants.

There will be more giveaways soon (as soon as someone gives me more stuff to give away).

Reader’s Note: Random Thoughts will return next week.

Also, watch for the First Big Cajun RRSP Software Giveaway! Coming real soon (once I figure out how it is going to work ).

Gasoline Pumps Inflation

Stats Canada announced the CPI for January and it looks like Inflation is starting to become more of a factor for the Bank of Canada to think about. Year over year for January Consumer Prices were up 1.9% (remember that in December year over year it was 1.3%), so the 0.6% jump is a big one.

Black Gold, Texas Tea

Yes, it is Gasoline prices that are helping fuel this inflationary jump, and this could mean follow on price increases as this price increase percolates through the system.

The increase in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. In January, gasoline prices were 23.9% higher than they were in January 2009. This follows a 25.6% rise in the 12 months to December 2009.

Gasoline prices exerted upward pressure on the CPI for the third consecutive month, as a result of price volatility in the second half of 2008 and the first half of 2009. Prices at the pump have been relatively stable since July 2009.

More importantly the Bank of Canada’s Core rate (which is what they start looking at for when they wish to increase interest rates) is now around 2.0% (year over year) up from 1.5% in December, which may cause the Bank of Canada think tank to start re-thinking when they plan on turning on the Interest Rate economy brakes, which most think is June July timeframe, but if we see another Inflationary jump next month, it may be sooner.

The Big Table of CPI

For those who love details and numbers, I present the Big Table for your perusal:

Not Inflating Yet

What with the Interest Rates remaining steady and the CPI only at 1.3% for the year sounds like things are just peachy and rosy in the financial world, but I suspect that the Financial Blogosphere may not completely concur with that statement yet:

• Larry MacDonald crunches some numbers and cries bullshit (his words not mine) for the Life Insurance versus RRSP scam being promoted by some financial planners. Isn’t it fun the games people play with numbers?
• After my post about Financial De-Cluttering I was glad to see the post 3 ways being organized can save you money from the Million Dollar Journey. Yes it seems obvious, but is it?
• Michael James talks about how the Assault on Public Service Pensions Begins a topic near and dear to my heart. I feel like Typhoid Mary, wherever I go, I bring Pension issues.
• Preet does some number crunching of his own in The Counter-Intuitivity of Fixed Income Indices although I am curious about the word Counter-Intuitivity, can I use it in Scrabble?
• The Canadian Capitalist commented on Canadian REITs: No Longer a Bargain one day I’ll have to ask him to give me a tutorial on REITs because I don’t think I completely grasp the concepts in these investment vehicles.
• Gail Vaz-Oxlade asks What Your Mulligan Be? in the area of personal finance. I have far too many of those I’d like to forget, but glad to see Gail confess she bought Nortel as well. I only have a few flaws in my Golf game as well: my stance, the way I hit the ball, my clubs, my inability to judge distance and my lack of hand eye co-ordination, other than that my Golf game is just fine.

Big C8j’s Tech Corner

Occasionally I’ll jump out of my main role of Personal Finance Guru [sic] and show that my real role in life is technical savant, here are a couple of interesting things to note on the technology side of things:

• And for those cheap buggers like me that don’t want to spend $200 on a specialized piece of hardware to read e-books, I give you the Kindle for a PC, so now you can buy a $200 netbook and use it like a Kindle.
• Do you have Windows 7? Do you still want to use your Windows XP applications well? Guess what, Microsoft now has an Windows XP Mode for Windows 7 which sounds like you should get!

Carnivals Too

You can find my post Do you have saving questions? at the Carnival of the Road to Financial Independance.

Stats Canada announced the CPI numbers for December and for all of 2009 and the trend started in November got a little more momentum with the CPI for 2009 being 1.3% (over 12 months), and Gasoline sits front and center again as an issue.

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices, which exerted upward pressure on the CPI for the second consecutive month. This follows an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.

For the year the big price jumpers were:

• Energy given we are back at $1 per liter this is no surprise there
• Transportation given gas prices again, no surprise, although the cost of mass transit is going up a lot too
• Health and Personal Care this one really worries me, if health care costs keep doubling the average on inflation, we older folks might be in trouble come retirement time
• Alcoholic Beverages not as high as health care, but you can at least give us a chance to drown our sorrows? C’mon!!!

See the big table for the numbers.

The Big CPI Table

I really like this table because it shows you all the ugly numbers together:

CPI Going Up

Stats Canada published the November Consumer Price Index numbers yesterday and it is starting to get some momentum in the UP direction, with their index going up by 1.0% (year over year ending in November 2009).

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. Prices at the pump are now exerting upward pressure on the CPI after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.

Interesting that gas prices in December seem to be dropping, so how this changes next month’s CPI remains to be seen.

Bank of Canada’s Core Index

More importantly the Bank of Canada’s Core Index is up 1.5% year over year, which is starting to push inflation into the target zone for the Bank. If this upward pressure continues, this may push the bank to act sooner with an Interest Rate increase to hopefully put the brakes on any Inflationary explosion.

The Big Table

NB: Random Thoughts may be on hiatus for a week or two, given the season coming up, or there might be a special Monday edition, if I feel exceptionally lazy next week.

Christmas Laziness and Cheer

I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).