“Things Are Not Normal Right Now”: Bank of Canada Hikes by Monster 100 Basis Points, Hits Mortgages. So Might the Fed after US CPI Fiasco, by Wolf Richter

Central banks are boring, and their actual importance to the economy is massively overstated (I traded bonds for 22 years and never paid much attention to any of them). The one thing you can count on is that when all prices are rising, like they are now, they will attribute it to everything but its true cause—inflation of the medium of exchange by a government or central bank. Presently no government issues a currency or debt instrument backed by real money, gold (see “Real Money”). From Wolf Richter at wolfstreet.com:

Blame whatever. Just don’t blame money-printing and interest-rate repression.

“To front-load the path to higher interest rates,” the Bank of Canada today jacked up its main rate by a 100 basis points to 2.5%, the fourth rate hike in a row, and the biggest rate hike since 1998, which made the BoC the first of the G-7 central banks to raise by 100 basis points in this cycle.

“An increase of this magnitude at one meeting is very unusual,” said BoC Governor Tiff Macklem in the opening statement. “It reflects very unusual economic circumstances: inflation is nearly 8% – a level not seen in nearly 40 years.”

CPI inflation in May had spiked by 7.7% from a year ago, and the June CPI hasn’t come out yet, but we know from the 9.1% June fiasco in the US, where services inflation is now spiking, that in Canada, June CPI readings are going to be ugly too.

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