A New Monetary Policy Tool: The Real Neutral Rate Yield Curve for Canada
With the Bank of Canada engaging in both conventional and unconventional monetary policy, the difference between the Bank of Canada’s policy rate and the neutral rate when the economy is at potential and inflation is on target is no longer sufficient in determining whether – and to what degree – monetary policy is stimulative or […] Barry Gros – Ontario’s New Target Benefit Plan Framework: One Caveat
To: Ontario Pension Observers From: Barry Gros Date: October 23, 2024 Re: Ontario’s New Target Benefit Plan Framework: One Caveat Last week, Ontario’s Ministry of Finance announced the finalization of regulations concerning its target benefit pension plan framework, to be implemented on January 1. The target benefit pension (TBP) plan framework is a welcome clarification of the rules […] Jeremy Kronick and Steve Ambler – The Bank of Canada must loosen monetary policy at a faster pace
Published in the Globe and Mail.
The inflation beast is looking considerably weaker. Between the Bank of Canada’s rate announcement on Sept. 4 and its announcement on Wednesday, Statistics Canada released two of its monthly reports on the consumer price index. They showed that headline inflation fell by almost a full percentage point and is now well below target.
For this reason, markets were not surprised by the 50-basis point cut in the Bank of Canada’s overnight rate target. The cut was fully baked into market expectations, and there was even speculation about a supersized cut of 75 basis points.
As it is, the bank has more work to do with its overnight rate. With inflation falling faster than the policy rate,…
Jeremy M. Kronick on BNN Bloomberg – How a 2% interest rate could impact mortgage rates
As Canada stays on track for a 2 percent inflation rate, what could this mean for mortgage rates? Jeremy M. Kronick, Vice-President, Economic Analysis and Strategy at the C.D. Howe Institute, explains.
Jeremy M. Kronick on BNN Bloomberg – Bank of Canada delivers 50 bps rate cut
Jeremy M. Kronick, Vice-President, Economic Analysis and Strategy at the C.D. Howe Institute, joins BNN Bloomberg to talk about The Bank of Canada delivering 50 bps rate cut.
Mark Zelmer – Banking is changing. Bank regulators need to adapt
Published in the Financial Post
Canada has not had a bank failure in over 30 years. But banking is changing, and so bank regulation may need to change, too.
Bank runs can now cripple an institution in a matter of hours, not days. Deposit insurance can no longer be counted on to prevent such runs. And a very different regulatory environment has emerged in the wake of the global financial crisis. Last year’s sudden collapse of Silicon Valley Bank in the U.S. and slower demise of Credit Suisse in Switzerland are examples of crises Canadian regulators might struggle to cope with if something similar happened here.
As banking evolves away from the system that existed in the last century, the risk of bank runs is likely to…
C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Cut Overnight Rate to 3.75 Percent Next Week, 3.00 by Spring, 2.50 Percent in a Year
October 17, 2024 – The C.D. Howe Institute’s Monetary Policy Council (MPC) calls for the Bank of Canada to lower its target for the overnight rate, its benchmark policy interest rate, to 3.75 percent at its next announcement on October 23rd. The MPC further calls for the Bank to lower the target to 3.50 percent at the following announcement in December, to 3.00 percent by April of 2025, and to 2.50 percent by October of 2025.
The MPC provides an independent assessment of the monetary stance consistent with the Bank of Canada’s 2 percent inflation target. MPC co-chair William Robson, the Institute’s President and CEO, chaired this meeting. MPC members make recommendations for the Bank of Canada’s target for the overnight rate…
Better Safe than Sorry: Options for Managing Bank Runs in the Future
While Canada’s prudential framework has successfully promoted a stable banking system for many years there are some emerging trends that suggest it may not be sustainable in the future. This Commentary considers four options to manage the risk of future bank failures in the event that we need to change our prudential framework. They range […] Graph of the Week: Canadian AI VC Investments Surpass $12.5B, Led by Finance, IT, and Business Services
Graph of the Week is a new series from the C.D. Howe Institute’s Graphic Intelligence that presents valuable and easily digestible data. Each Monday we unveil one new captivating chart or graph with interesting insights, explaining it in two-to-three sentences. Dive into the data with us.Over the past six years, more than US$12.5 billion in […] Ambler, Kronick – If inflation falls again, BoC should cut interest rates 50 points
Published in the Financial Post.
It is rare for the Bank of Canada to change its policy interest rate by more than 25 basis points, either up or down. Big changes have been reserved for crises, like the beginning of the pandemic, when the Bank made three 50-basis-point cuts in a single month, or when inflation is running out of control, as it was in late 2022 when the bank raised its rate by 50 basis points. Last week’s news that inflation has returned to the bank’s two percent target does not signal a crisis but in our view it does mean a larger-than-normal cut is called for. Without an aggressive cut, the economy could tip into a needless recession.
It’s been a long road since inflation first rose above its official two…
Graph of the Week: Core Inflation Components Fall Below 3% – A Sign of Broad Softening
Graph of the Week is a new series from the C.D. Howe Institute’s Graphic Intelligence that presents valuable and easily digestible data. Each Monday we unveil one new captivating chart or graph with interesting insights, explaining it in two-to-three sentences. Dive into the data with us.Headline inflation came in right at the 2 percent target […] Laurin, Dahir – An Election Platform Suggestion for All Parties: A Revenue-Neutral Tax Reform
From: Alexandre Laurin and Nick DahirTo: Canada’s political partiesDate: September 23, 2024Re: An Election Platform Suggestion for All Parties: A Revenue-Neutral Tax Reform A change in Canada’s tax mix is a perennial idea from tax policy experts. This country is an average-tax nation overall but it relies far more on income taxes and less on consumption levies, as a share […]