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Good morning. It's that time again: Mariah Carey is fully defrosted as we speak. Bundle up and click away at your computer to the tune of this cozy playlist. 

Also, a programming note: Btchcoin will be taking a hiatus, so you won't be seeing us in your inbox every Monday morning for the next little while. We'll keep you posted if things change, but until then, we hope you keep making those money moves 💸

In this edition:🥲 Our fave words that start with "I"📲 Talk to the hand 

— Vindhya Kolluru, Editor

ECONOMY

Are rising interest rates actually bringing inflation down? 

What is less shocking than seeing Pete Davidson dating the next hottest celeb it girl? Perhaps it’s another interest rate hike by the Bank of Canada to try and curb inflation. 

ICYMI: On December 7, the Bank of Canada (BoC) announced that it will raise interest rates by another 50 basis points to 4.25% to help curb inflation, marking the 7th rate hike since the start of 2022. 

Quick refresher: What the heck is a basis point? Not to bring us back to Grade 5 math, but a basis point is one-hundredth of a full percentage point (aka 0.01%). Basically, the finance industry’s way of confusing us with special ways of describing simple terms — because why not just say 0.50%? (🙄).

The move to raise interest rates at the latest policy meeting was not too surprising for many Canadian economists since Tiff Macklem, the BoC governor, has said that the goal is to get Canada’s inflation back down to 2%, and it still has a long way to go from where it currently sits at 6.9%. And although it seems as if inflation has cooled off in the last month – are higher interest rates actually doing anything? First, let’s break down how the relationship between interest rates and inflation works, which really boils down to supply and demand. 

• When supply is low, prices go up: Over the last year, we have lived through several causes that have affected supply within our global economy, such as panini-related restrictions, supply chain issues (remember all the Suez Canal memes?), and most notably, the war in Ukraine. So, it's not just a singular event that has contributed to high inflation, but rather all of these events put together.

• When demand is high, prices also go up: Cue our tears over T-Swift tickets being sold for five figures apiece. High demand plus low supply really doubles down on rising prices and inflation. Key factors contributing to spending (aka demand) over the last year include higher household savings enabled by reduced spending during lockdowns on things such as travel and pandemic-related relief policies from the government.

So, what the BoC is attempting to do is to slow spending (reduce demand) by making borrowing more expensive via higher interest rates on things like mortgages and credit cards. Once supply and demand are back in check, prices and inflation should cool back down, or that's the idea, at least. 

But is it actually working? Jim Stanford, economist and Director of Centre for Future Work, told CBC that rising interest rates have had ‘zero’ impact on Canadian inflation and that the recent cooling in inflation (from 8.1% to 6.9%) is ‘purely’ due to lower gasoline prices. Stanford says that raising Canadian interest rates will do nothing to the global factors that are truly driving inflation and that longer-term structural policies from the federal government would have a larger impact than rate hikes.

• Governor Macklem has acknowledged that although the BoC can’t control global developments it can influence supply and demand within the Canadian economy to help ease the overall inflationary picture. And we may be starting to see his strategy play out by way of deflating certain asset bubbles like the housing market, reportedly down 14% from its peak.

The bottom line: Welp, it doesn’t look like our weekly trip to the grocery store is going to get any cheaper in the near term (and if you don’t believe us check out how much inflation has impacted how far your dollar goes with this cool tool we found). So, we recommend it’s time to hunker down and stick to that budget we laid out. 

— Jodi Anderson

TELECOM

Tacking on swipe fees to your phone bill...potentially

It’s the holiday season, and with that comes holiday deals. Telecom companies also have Black Friday and Boxing Day sales around this time, and many try to use this to get score cheaper deals. It's no surprise, considering:

• Canadians pay some of the highest cell phone plans compared to other countries. 

• We pay 20% more than Americans. 

• 170% more than Australians. 

This is mostly due to the market being owned by the Big Three (Bell, Rogers, and Telus). Unfortunately, these prices may increase even more, and it’s not due to inflation like many might think.

Background: Visa and Mastercard Canada have been embroiled in a lawsuit over frhigh interchange fees or “swipe fees” (the cost of processing payments). The fees are decided and collected by credit card networks (like VISA and Mastercard) on every transaction. In October, this lawsuit reached a settlement in which the businesses in Canada can pass on this charge to their customers who use a credit card to make a purchase.

What happened? Telus filed an application to Canadian Radio-television and Telecommunications Commission (CRTC) to charge customers who pay their phone bill by credit card the “swipe fee” of 1.5%. The application was focused on customers in Alberta and B.C. whose fees are regulated by the CRTC. (Folks outside of these provinces have already been notified of this surcharge.)

What’s being done to protect those customers? The CRTC blocked the fee, stating that it would be bad for customer affordability. We have seen that more and more people are turning to credit cards to make payments as the cost of living continues to rise. Cash (which is cool again, thanks to Gen Z TikTokers?) is not an option, and tacking on additional fees to already high cell phone plans will only make it harder on Canadians. CRTC has made it clear that it is prepared to fight and use all available regulatory options (😳) if the telecom industry makes this a practice.

— Harsimran Garcha 

Other things we read and we liked 

 🌎 An underexplored look at the invisible workforce that makes AI possible.

📱 Meet the woman who revolutionized online dating two decades ago. 

🎨 The AI art app you're seeing across your Instagram feed might be problematic. 

💸 Should you help a friend who is in serious debt? If so, how? 

🥤Pepsi + milk = the drink combination that shouldn't exist, but unfortunately does.