On today’s show we’re talking about the coming economic winter. The US Commerce Department reported new inflation metrics for the month of June, showing that inflation metrics are accelerating. The official current inflation rate is running at 9.1% in the US. In Canada, the inflation rate topped 7.7% in May and is expected to average 8% in the second and third quarter. Only a month ago, the bank of canada was predicting inflation would remain around 5.8%. Clearly that was incorrect.
This means that inflation is actually ramping up.
But we need to look deeper at the numbers to truly predict what is going to happen.
The Bank of Canada increased interest rates on Wednesday by 1%, compared with the 0.75% that had been leaked to the press in the weeks leading up to the announcement.
I’m going out on a limb and say that inflation is going to be even higher in the coming months than either the Fed or the Bank of Canada have been predicting.
We have some economists predicting that the fall in oil prices over the past two weeks will translate into lower inflation. I don’t agree with that assertion.
The reason that I’m not agreeing with economist predictions is that the producer price index is currently running much higher than the quoted rate of inflation. If the producer price index is running at an annual rate of 16.8%, does it make sense that inflation is only 9.1%? Those two numbers seem too far apart for them both to be correct.