HAWKISH?
How did such an elegant bird become the scapegoat? Many of us in Alberta have seen beautiful hawks in flight, or on their favourite fence-post. Ornithologists (bird experts, of which I am not) believe Hawks are highly intelligent, powerful and have excellent hearing and sight. These graceful birds were just out there, doing their thing, when they somehow became the symbol of aggressive monetary policy (higher interest rates) to control inflation.
Depending on the source, some economists think that a Hawkish policy is similar to these beautiful birds when they are hunting—because hawks appear to focus only on their prey. A “hawkish central bank” tightens money lending to decrease inflation and ideally avoid recession. But are these central banks so laser-focused that they miss/create some unintended consequences?
Canada’s inflation rate recently came in at 3.4%. May I say this is a fabulous improvement since the 8.1% of June, 2022?! But clearly, our inflation rate is not where it needs to be, yet. Alberta’s inflation rate was 3.0% year-over-year for December; this is also a grand improvement from 6.4% in 2022. Alas, we dream of better numbers!
Basically, inflation is still higher than it needs to be, interest rates are higher than we would like them, and the economy debate has so many angles it is far beyond the scope of a humble real estate blog.
So, what’s my point?
Experienced real estate investors are moving forward with cautious optimism (keeping it positive, and keeping it real!). They’re not distracted by all the feelings that are being reported. https://leger360.com/surveys/economic-confidence-january-2024/#:~:text=35%25%20of%20Canadians%20think%20that,of%204%20points%20since%20September.
At a national level, according to this report, “63% of Canadians say that their confidence in the national economy is poor or very poor” which is actually a 3% improvement from the last poll. But here’s where it gets a bit weird. The survey showed that Albertans have the least confidence in Canada’s economy (relative to other provinces); 68% of Albertans have that “poor or very poor” mindset. Huh. Who knew we’re such pessimists –as consumers?
Is it CEBA loans coming due? Is it newcomers struggling? Is it entrepreneurs and employees who are tired after the Alberta recession, followed by Covid, followed by dramatic increases in interest rates and inflation? The survey just measures the temperature of people’s worries, not the causes.
As real estate investors, we need to take a breath and not get caught up in the drama and headlines. Alberta’s economy is resilient, our population is growing, and despite the headlines, there are still plenty of jobs for home-grown Albertans and newcomers. We might not be booming, but we shouldn’t be glooming about our economy either.
We suggest putting on your boxing gloves, or your blinders, or maybe even your earplugs next week. The catastrophizing about economics, interest rates and inflation will be prime time when the Bank of Canada does their announcement. In contrast, we’re staying focused on ways to provide rental housing to more amazing Albertans. Be warm and be well on your financial freedom journeys!
