Deflation Looms Again

From Bloomberg:

Canada Inflation Falls Below Central Bank’s 2% Target

Canada’s inflation rate fell in March to less than the central bank’s 2 percent target for the first time in 18 months as price increases for food and energy slowed.

The consumer price index rose 1.9 percent in March from a year earlier, following a 2.6 percent gain in February, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile items, also slipped to 1.9 percent from 2.3 percent.

Economists surveyed by Bloomberg forecast 2 percent total inflation and core inflation of 1.9 percent.

Bank of Canada Governor Mark Carney said April 18 that inflation will slow after the first quarter, then remain at about 2 percent through 2014. The central bank raised its inflation outlook from its January forecast because of a gain in oil prices and reduced slack in the economy, adding that an increase in the policy interest rate “may become appropriate.”

Canada’s dollar pared gains after the report. It advanced 0.3 percent to 99.24 cents per U.S. dollar at 8:38 a.m. in Toronto. One Canadian dollar buys $1.0077.

My view:

The pump and dump gang has failed again.

Central bankers attempts at reflating the credit bubble are clearly unsuccessful based on the latest numbers from Statistics Canada.

While ultra low interest rates have succeeded in temporarily lifting energy and food prices, Canada faces a looming crunch on illiquid assets values - namely houses and commercial properties.

The housing bust that the US experienced from 2007 to present has only begun to affect Canadian property values.

Once the Canadian public wakes up to the fact that they are not some oasis of stability in a world of deflating debt, we will see a rapid descent in housing prices and the associated deflationary effects.

That's right Canadians, just because you have "the most stable banking system in the world", does not mean that you can escape the reality of market forces when you borrowed too much and consumed too much.

Those who are wise will capitalized on those inflationary house capital gains before they disappear as they did so rapidly south of the border in 2007 & 2008.