this post was submitted on 27 Jun 2023
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Changing the formula isn't a problem, it changes all the time (and SHOULD change all the time). In my opinion the problem is the choice of headline from CBC. Even the article acknowledges the headline inflation rate is being influenced downwards by volatile items, and that economists as well as the BoC don't really care what the headline rate is. All eyes are still on the underlying "warm" parts of more consistent categories.
I agree that the basket of goods should change, but it's also weird that they've been changing it every year that they've been worried about runaway inflation.
It normally changes every few years. Not every year for the last 3.
Basket of goods changes when the goods people are buying changes.
Basket of goods might have included lobster when lobster was a cheap source of protein, but it sure as hell isn't going to include lobster today.
To me it makes perfect sense that they are more granular during times when volatility is up and inflation is a concern. Otherwise everyone would be (rightfully) complaining that they are using outdated models when inflation needs to be gotten under control.
Besides, the new weighting is public. It didn't change all that much. I'm not going to run the numbers but the napkin math says 1) it wouldnt significantly change the headline rate and 2) it wouldnt change what we take away: it's artificially lowered by volatile items like gasoline, and underlying consistent categories are still too hot for the BoC. So while it's true that the headline rate is "bullshit", it's not because they changed the weighting.