Chapter 5
http://www.cbc.ca/money/story/2007/03/20/inflation-feb.html
Dollar soars as inflation rate jumps
According to statistics, Inflation rates have increased since last month. The canadian dollar rised to a three-week high after Statistics Canada said the country’s annual inflation rate increased in February. The loonie rose 1.25 to close at 86.17 cents US, this suggests that imminent interest rate cuts aren’t likely. February’s annual rate jumped to 2%, up 0.8% points from January which was much higher than people had expected. This is the biggest one month gain since Hurricane Katrina. Consumer prices rose by 0.7% in February which was due to gasoline prices as pump prices soared by almost 10% in Ontario. There were gas stations closed because there was production interruption in Ontario and Quebec. There was a 12% rise in the cost of fresh vegetables and an 11.3% rise in the cost of travel tours. The core inflation rate rose to an annual rate of 2.1%. Rising house costs added increasing pressure to the CPI. Statistics Canada said it costs more to carry a mortgage and homeowner replacement costs, which were estimated using new housing prices, were 7.1% higher than an earlier year. The annual inflation rate would have been higher, but for the the major drop of 19% in gas prices recently. Prices rose in all provinces in February but only 3 provinces experienced price rises faster than the national average. Alberta has the highest inflation rate in Canada with 4.9% higher than a year earlier because of the higher housing costs. B.C. and Manitoba also exceeded the country’s average. An economist from BMO Capital Markets said, “it will keep the central bank cautious about cutting interest rates in the face of disappointing growth numbers.”
In chapter 5, we learned about inflation which is used to increase the general level of retail prices. There are problems that occur in rising prices like individuals who are on a fixed income. Rising prices benefit people who have borrowed money and do not benefit the ones who lent money. The money that a person owes will be worth less than it could have originally been after inflation. With the increase in the report, it could hurt Canada’s world market because it can become too expensive for foreign markets. Once price starts to get higher and higher, it is going to be hard to control. There are two ways that cause inflation, Demand-Pull inflation and Cost-Push inflation. It is kind of hard to determine which one but this situation for Canada right now I believe is more of a Demand-Pull Inflation. People are worried about price increases in the future so the demand for a product is high right at the moment and when demand is high, price increases. Canada should fix this inflation problem because as the rate of price increases higher and higher, it will be hard to control. And that can lead to demand for higher wages and then prices for products increase again. This cycle problem which may happen, does not have an easy solution.
Dollar soars as inflation rate jumps
According to statistics, Inflation rates have increased since last month. The canadian dollar rised to a three-week high after Statistics Canada said the country’s annual inflation rate increased in February. The loonie rose 1.25 to close at 86.17 cents US, this suggests that imminent interest rate cuts aren’t likely. February’s annual rate jumped to 2%, up 0.8% points from January which was much higher than people had expected. This is the biggest one month gain since Hurricane Katrina. Consumer prices rose by 0.7% in February which was due to gasoline prices as pump prices soared by almost 10% in Ontario. There were gas stations closed because there was production interruption in Ontario and Quebec. There was a 12% rise in the cost of fresh vegetables and an 11.3% rise in the cost of travel tours. The core inflation rate rose to an annual rate of 2.1%. Rising house costs added increasing pressure to the CPI. Statistics Canada said it costs more to carry a mortgage and homeowner replacement costs, which were estimated using new housing prices, were 7.1% higher than an earlier year. The annual inflation rate would have been higher, but for the the major drop of 19% in gas prices recently. Prices rose in all provinces in February but only 3 provinces experienced price rises faster than the national average. Alberta has the highest inflation rate in Canada with 4.9% higher than a year earlier because of the higher housing costs. B.C. and Manitoba also exceeded the country’s average. An economist from BMO Capital Markets said, “it will keep the central bank cautious about cutting interest rates in the face of disappointing growth numbers.”
In chapter 5, we learned about inflation which is used to increase the general level of retail prices. There are problems that occur in rising prices like individuals who are on a fixed income. Rising prices benefit people who have borrowed money and do not benefit the ones who lent money. The money that a person owes will be worth less than it could have originally been after inflation. With the increase in the report, it could hurt Canada’s world market because it can become too expensive for foreign markets. Once price starts to get higher and higher, it is going to be hard to control. There are two ways that cause inflation, Demand-Pull inflation and Cost-Push inflation. It is kind of hard to determine which one but this situation for Canada right now I believe is more of a Demand-Pull Inflation. People are worried about price increases in the future so the demand for a product is high right at the moment and when demand is high, price increases. Canada should fix this inflation problem because as the rate of price increases higher and higher, it will be hard to control. And that can lead to demand for higher wages and then prices for products increase again. This cycle problem which may happen, does not have an easy solution.
posted by MarcoLeung at 11:35 PM
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