ITS CONTINUING TO COMPLICATE THE STORY OF DEBT FOR HOUSEHOLDS ACROSS THE COUNTRY. I WANT TO BRING BACK FRANCES DONALD GLOBAL CHIEF ECONOMIST AND STRATEGIST. A MAN LIKE BEST MANAGEMENT HAS BEEN OUR GUEST HOST THIS HOUR AND HOUSING STORY IS ONE THAT YOU'RE WATCHING CLOSELY AS WELL. WE'RE WATCHING HIM, BUT WE'RE WATCHING IT FOR DIFFERENT REASONS THAT WE USED TO WATCH HOUSING AS ECONOMISTS, WE USED TO SAY, OKAY, PEOPLE LOSE THEIR JOBS WHERE THEY'RE FACING HIGHER INTEREST RATES THAN WE SHOULD SEE HOUSING WEEKEND. >> WHAT'S BEEN REALLY STRANGE IS THAT WE'VE HAD ONE OF THE LARGEST INCREASES IN INTEREST RATES IN MANY CANADIANS LIVES, ESPECIALLY WHEN ADJUSTED FOR DEBT HOUSING HAS NOT BROKEN. AND THAT'S BECAUSE WE HAVE AN ENTIRELY NEW FACTOR PLAY. AND THAT IS REALLY SUBSTANTIAL POPULATION GROWTH. AND IT IS TRUMPING JUST ABOUT ALL THE STANDARD ANALYTICS AND DATA POINTS THAT WE USED TO EXAMINE. BANK OF CANADA HAD AGREED CHART IN ITS APRIL MONETARY POLICY REPORT. CHART 15 AND SEARED INTO MY MEMORY. IT SHOWED THAT WE'RE BUILDING ABOUT 250,000 HOMES A YEAR UP ABOUT IN CANADA, BUT HOUSEHOLD FORMATION, THAT'S NEW FAMILIES THAT NEED HOMES IS RUNNING ALMOST DOUBLE THAT JON. SO FOR EVERY HOUSE WE BUILD THE BUILDING UP THIS BACKLOG OF 2 FAMILIES THAT NEED IT. AND THE BIGGER PROBLEM IS THAT WE'RE OPERATING IN 100% CAPACITY WHEN IT COMES TO BUILDING IN CANADA. SO WE CAN'T EVEN INCREASE THAT BUILDING NUMBER IN A SUBSTANTIAL WAY. SO EVEN THOUGH I SEE RECESSION RISK IS ELEVATED EVEN THOUGH WE KNOW CONSUMERS ARE STRUGGLING UNDER THE WEIGHT OF HIGHER INTEREST RATES, ESPECIALLY THOSE THAT ARE GOING TO BE RENEWING IN THE COMING YEAR. WE'RE REALLY BEING DWARFED BY POPULATION GROWTH, JUST OVERWHELMINGLY PROVIDING DEMAND AND PROVIDING A BIT UNDER HOUSE. AND SO IF YOU ARE A CENTRAL BANKER OR THE HEAD OF THE BANK OF CANADA AND YOU'RE TRYING TO NAVIGATE THIS PART OF THE STORY ON WHAT YOU DO WITH INTEREST RATES. WHAT YOU THINK IS THE BEST WAY TO THINK ABOUT WELL, THE BANK OF CANADA THEMSELVES HAS BEEN A LITTLE MORE VOCAL LATELY THAT, WELL, HOUSING IS NOT REALLY GOING TO BE THE MAIN DRIVER OF INTEREST RATES. NOW THEY DO NEED TO MONITOR IS THEIR FROSTING COMING FROM THE CREDIT CHANNEL. FOR EXAMPLE. BUT I THINK WE'RE GOING TO HEAR MORE FROM THE BIG CANADA OR MAYBE WE SHOULD THEY CANNOT BE RESPONSIBLE FOR THE OUTCOME OF HOUSING WHEN THEY'RE BEING DWARFED BY SUCH SUBSTANTIAL POPULATION GROWS. AND AT THE SAME TIME, THE REALITY OF SOME OF THE INFLUENCE INFLATION FOR THE BREAK, SOME OF THE METRICS THAT WE'VE BEEN WATCHING EVERY TIME WE GET INFLATION REPORT. >> COME OUT OF THE HOUSING MARKET YET BECAUSE OF THIS HIGHER INTEREST RATE ENVIRONMENT. SO THAT IS THE ONE THING THAT THEY CAN. WHERE POLICY RATES ARE CONTROL. OBVIOUSLY WHAT'S HAPPENING WITH THE POPULATION ITSELF. WHAT DO YOU MAKE OF THE INFLATION THAT'S COMING FROM THINGS LIKE HIGHER RENTS OR HIGHER MORTGAGE COSTS. WE HAVE TO THINK ABOUT THAT. IF YOU MAKE A TABLE AS WE DO, IT'S REAL FUN OF EVERY SINGLE COMPONENT. CPI SHELTER IS THE PREDOMINANT ONE PROVIDING LIFT, WHICH IS WHY A LOT OF ECONOMISTS HAVE STARTED DOING MORE CPI X SHELTER. >> TO GET A SENSE OF WHAT'S HAPPENING NOW, CANADIANS MAY FEEL UNCOMFORTABLE. THIS SHELTER IS ONE OF OUR OR OUR LARGEST PERSONAL EXPENSE IS WHY WOULD BE EXCLUDED. BUT THE BANK OF CANADA AND ALL GLOBAL CENTRAL BANKS IS GOING TO HAVE TO START MAKING SOME DECISIONS. DO THEY RISK? RECESSIONS RAISE UNEMPLOYMENT TO TRY TO BRING DOWN INFLATION THAT IS LESS SUSCEPTIBLE TO INTEREST RATES. I THINK WE'RE AT A BIG CONVERSATION ABOUT WHAT CENTRAL BANKS CAN DO IN A WORLD THAT IS REALLY BEING DOMINATED BY MORE SUPPLY SIDE FACTORS. SIMILARLY, YOU KNOW, FOOD PRICES AREN'T WILL HIGH IN CANADA AND ELSEWHERE BECAUSE YOU AND I EATING TOO MUCH. JON. THEY'RE HIGH BECAUSE OF GLOBAL FACTORS, SUPPLY CHAINS, GEOPOLITICAL RISKS, DROUGHTS, WEATHER EVENTS THAT ARE OCCURRING OUTSIDE OF OUR CAN THE BANK OF CANADA BRING DOWN FOOD PRICES AT THE MARGIN, MAYBE BUT WE'VE GOT TO HAVE SOME CONVERSATIONS ABOUT JUST HOW POWERFUL CENTRAL BANKS ARE AND HOW MUCH PRESSURE SHOULD BE PUT ON THEM TO SOLVE PROBLEMS. THEY CAN'T. WELL TO GIVE US A LOT TO TALK ABOUT. SO WE DEFINITELY LIKE ASK THOSE QUESTIONS REAL QUICKLY. WE'RE ALMOST AT A TIME IN THIS BLOCK. BUT THE IDEA THAT IF THERE'S A SIGNAL FROM THE BANK OF CANADA, THAT IT'S TIME FOR A PIVOT AND MAYBE THAT'S NEXT WEEK. >> SOME PEOPLE SAY, OH, THAT'S GOING TO WE DO A WHOLE BUNCH OF PEOPLE COMING BACK INTO THE HOUSE. AND MARK, WHAT WAS YOUR VIEW MY TEAM? WE'RE TALKING ABOUT THIS BECAUSE THE BANK OF CANADA HAS ALREADY SIGNALLED THAT A PIVOT IS COMING. YOU MIGHT REMEMBER GOVERNOR MACKLEM TELLING US JUNE IS ON THE TABLE THE HEADLINE OF THE DAY LAST MONTH. >> AND YET, MARCH AND APRIL HOUSING DATA WAS ACTUALLY A LITTLE BIT SOFTER. NOW, AS I SAID, WE THINK THERE'S A FLOOR UNDER HOUSING EXCUSE THE PUN, BUT WE DO THINK WE NEED TO MONITOR THAT. WE DIDN'T SEE
