Core Consumer Price Index Inflation Vs. True Inflation

http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm

On this latest release from Statistics Canada it is stated that “Overall, energy prices went up 8.2% between January 2009 and January 2010, following a 5.9% increase in the 12 months to December 2009.” Yet at the same time the Media continually states that Inflation never seems to be more than 2-3%? That’s because they are going by the Core Consumer Price Index which is a complicated calculation that does not seem to give us a clear picture of true inflation in Canada. How much have fuel, groceries and taxes gone up over the last 10 years, 2% per year? When I ask many people the question of how much they think true inflation is, they reply that they believe true inflation has to be at least 6%, and I’ve even had some reply that they think actual inflation is closer to as high as 9%. What do you think True Inflation is?

Increasing Interest Rates in Canada

http://www.financialpost.com/news-sectors/economy/story.html?id=2631601

This article in the Financial Post eluded to the possibility of Interest Rates increasing in Canada as early as July 2010. Originally the projection for the beginning of the increase was to be in October, then retracted to possibly September, now maybe July? Canada went beyond the projections for 2010. Over the last 2 quarters of 2010 output was increased in Canada and it was announced that inflation was increasing at a faster rate than expected. As demand in the economy increases so does interest rates typically rise. Is the economy coming back or will there be another major downturn? In many of the financial downturns in history there was a big down swing, followed by a short up swing and then a bigger down swing! Because much of the East Coast in Canada is still suffering from the recession we need to still keep the cost of living low. People cannot get caught up in the media hype that states the economy is rebounding at a fast rate. As we’ve seen in the past when economies rise at a fast rate it is not sustainable. Even though core inflation is stated to remain under 2%, that does not mean that true inflation is not rising at a rapid rate.

For more information on the Core Consumer Price Index Inflation vs. True inflation, please check back here in the next few days for my new blog entries.