C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Hold Overnight Rate at 5.00 Percent, Cut to 3.50 Percent by March of 2025
February 29, 2024 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada maintain its target for the overnight rate, its benchmark policy interest rate, at 5.00 percent at its next announcement on March 6th. The MPC further recommends that the Bank keep the target at 5.00 percent in April, before reducing it to 4.50 percent by September and to 3.50 percent by March of 2025.
The MPC provides an independent assessment of the monetary stance consistent with the Bank of…
Brian Lewis – Practical Advice for the Ontario Infrastructure Bank
From: Brian Lewis To: Ontario taxpayers, infrastructure policy makers and investors Date: February 26, 2024 Re: Practical Advice for the Ontario Infrastructure Bank The provincial government recently announced the creation of an Ontario Infrastructure Bank to help build more infrastructure faster while lowering taxpayer costs. The new bank would do this by leveraging private sector capital and expertise […] Jeremy M. Kronick – The Unintended Consequences of Ottawa’s 35-percent Interest Rate Cap
From: Jeremy M. Kronick To: Finance Minister Minister Chrystia Freeland Date: February 20, 2024 Re: The Unintended Consequences of Ottawa’s 35-percent Interest Rate Cap Ottawa has set its sights on reining in predatory lending rates. Last year it set out draft regulations that would lower the rate non-prime lenders can charge from 48 to 35 percent […] When Ottawa caps interest rates, high-risk borrowers don’t get loans – Financial Post
Ottawa has set its sights on reining in predatory lending rates. Last year it set out draft regulations that would lower the rate non-prime lenders can charge from 48 to 35 per cent (“annual percentage rate” or APR). Will that keep people who are prey to predatory lending from entering a cycle of debt? Probably not.
There are two types of borrowers, prime and non-prime. Prime borrowers have strong credit scores that give banks and credit unions confidence they will pay their loans on time and in full. As a result, they can borrow at reasonable interest rates. Non-prime borrowers are more diverse. Some have a checkered repayment history. Others, including immigrants, have no Canadian credit history. Because banks and credit…
The old bank and the Red Sea: Bank of Canada must address threat of geopolitics – Globe and Mail
The Bank of Canada again held its target for the overnight rate at 5 per cent on Wednesday, as expected.
The clamoring had begun for the bank to consider dropping rates in hopes that inflation is headed back to 2 per cent. However, the latest numbers (for December) disappointed, with headline inflation ticking back up to 3.4 per cent (from 3.1 per cent), and core measures flat or, in the case of CPI-Trim, slightly higher. On Wednesday, the bank stressed upside risks to inflation coming from greater-than-expected persistence.
However, the announcement did not mention geopolitical risks, particularly the effect of the disruption of maritime traffic in the Red Sea, its impact on shipping costs, and the knock-on effects on…
C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Hold Overnight Rate at 5.00 Percent through March, Cut to 3.75 Percent by January of 2025
January 18, 2024 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada maintain its target for the overnight rate, its benchmark policy interest rate, at 5.00 percent at its next announcement on January 24th. The MPC further recommends that the Bank keep the target at 5.00 percent in March, before reducing it to 4.50 percent by July and to 3.75 percent by January of 2025.
The MPC provides an independent assessment of the monetary stance consistent with the Bank of Canada’s 2 percent inflation target. William Robson, the Institute’s CEO, chairs the Council. Council members make recommendations for the Bank of Canada’s upcoming interest-rate announcement, the subsequent…
Paul R. Masson – Goldilocks Interest Rates Needed to Help Housing Affordability
From: Paul R. Masson To: Canadian housing watchers Date: January 15, 2024 Re: Goldilocks interest rates needed to help housing affordability In the current debate about how to make housing affordable in Canada, there is a curious omission: The role of monetary policy, which was excessively loose in creating the problem and can be more responsibly applied to solve it. […] Lester, Laurin – The Federal Debt is Not Sustainable
To: Canada’s budget observers From: John Lester and Alexandre Laurin Date: January 5, 2024 Re: The Federal Debt is Not Sustainable The recent Fall Economic Statement (FES) contains a familiar rosy assessment of federal debt sustainability. It shows the ratio of debt to GDP declining continuously over 30 years starting in the second year of the medium-term forecast, […] Ambler, Kronick – Inflation Targeting Ain’t Broke So Let’s Not Fix It
From: Steve Ambler and Jeremy M. Kronick To: Canadians Worried About Inflation Date: January 4, 2024 Re: Inflation targeting ain’t broke so let’s not fix it Despite disappointment in the performance of many central banks, let’s not lose sight of key lessons. First, inflation stinks, inflicting most harm on those who can afford it least. Second, central banks […] Angelo Nikolakakis – Here’s How Ottawa’s Financial Institution Tax Will Really Work
From: Angelo Nikolakakis To: Finance Minister Chrystia Freeland Date: January 2, 2024 Re: Here’s How Ottawa’s Financial Institution Tax Will Really Work Tucked into November’s 500-page Notice of Ways and Means motion is an unwise measure that urgently needs to be withdrawn. First announced as part of Budget 2023, it imposes an additional $3 billion of federal income tax on “financial institutions” over […] Inflation targeting ain’t broke so let’s not fix it – Financial Post
The last two years have not been kind to central banks. Inflation in many countries soared far beyond target, reaching levels not seen in decades. Central bankers have responded with necessary but painful interest rate hikes.
Despite disappointment in the performance of many central banks, let’s not lose sight of key lessons. First, inflation stinks, inflicting most harm on those who can afford it least. Second, central banks are the best institutions we have to make sure it goes away and doesn’t come back. As we head into 2024 and inflation continues to fall, it’s worth remembering why the world established central banks and low inflation targets in the first place.
Until the 1990s, central banks struggled…
The Need for Speed: The Benefits of Faster Payments and How to Achieve Them
In this study, we estimate the efficiency gains associated with the introduction of the Real-Time Rail (RTR), Fast Payment System (FPS) in Canada. In a benchmark scenario, we estimate that these gains will amount to $3.24 billion over the first five years after introduction of the system. These gains will arise mainly from: 1) the […]