This week's non-announcement announcement about interest rates got me thinking, about interest rates.
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To recap the Bank of Canada left its trend setting interest rates unchanged this week.
It wasn't a surprise to many, but some people believed it was actually going down, because the country is technically in a recession and others think it should start inching up because the economy seems to finally be starting to add jobs.
It would be nice if everyone would just remember that the bank's actual job is to hold inflation to a set target, usually thought of as being two percent, although usually expressed as a range between one and three per cent.
The bank is supposed to do this, by controlling the supply of money.
Its mandate actually, as I understand things is not to fix a broken economy, supply stimulous to create jobs, or lower the dollar to help exports and corn producers.
However all of those conditions do, or at least can, factor into what the inflation rate will turn out to be, so the bank does have a little bit of wriggle room.
If I were a betting man I'd bet the bank wants to stimulate the economy, and will continue to want to for quite some time.
If I were a betting man I would also be the bank wants to be very careful how much it is seen to influence things, especially during an election.
We don't all remember the 1970s and 1980s but in that bygone era central banks decided that the threat posed by high inflation was greater than the threat of unemployment and potention for foreclosures of farms and houses.
They succeeded in ending the threat of inflation but not before driving up unemployment to levels that didn't match the great depression, but sure made it feel like one.
Farmers who had never missed a mortgage payment in their lives got foreclosure notices because the ratio of their payment to equity got out of line. Sometime those foreclosure notices were handled in particularly ugly ways.
Many people, faced with scenes like that wondered if they would ever pay off even their existing farm loans. The Bank of Canada giveth, and the Bank of Canada taketh away. The 35 year decline in interest rates has been good for many of us, including the agricultural sector. People who follow such things tell us the low Canadian dollar has created some support for for the local grain markets.
That generally makes farmers a little happier. What one never knows, of course is how long that happiness will last. Sooner or later we are told rates will go up. I don't know, there is nothing on the horizon that says the need to, other than they are very low.
I've said in the past, I can't predict the future, I don't think anyone else can either, but it seems likely that if there is a change it direction it'll be triggered by something outside the Bank of Canada's control.
Something American or even European, will be the thing to watch.
But until it does, the low interest rate boom continues......
