Paul Jenkins – Interest Rates… Back to the Future
From: Paul Jenkins To: Borrowers, Savers, and Policymakers Date: April 28, 2022 Subject: Interest Rates… Back to the Future Interest rates, particularly rising interest rates, are on everyone’s mind these days. The focus is primarily alarm about rising inflation and the actions – actual or anticipated – by major central banks to bring inflation under […] Goodhart, Peiris, Tsomocos, Wang – Corporate Legacy Debt, Inflation, and the Efficacy of Monetary Policy
From: Charles A.E. Goodhart, M. Udara Peiris, Dimitrios P. Tsomocos and Xuan Wang To: Canadians Concerned About Inflation Date: April 27, 2022 Re: Corporate Legacy Debt, Inflation, and the Efficacy of Monetary Policy Corporate debt in Canada has been increasing, alongside other advanced and emerging economies, since 2007, and the pandemic has led to a further sharp increase (See […] High Inflation Disease Now Affects Two-thirds Of Canadian Economy
When the year-over-year increase in the CPI rose above the top of the Bank of Canada’s 1-to-3 percent target band a year ago, disrupted supply chains for specific products and base effects received a lot of attention. Since then, it has become clear that rapid price increases are much more widespread, and much less transitory. […] Ambler, Kronick – You Cannot Fight Inflation on the Downlow
From: Steve Ambler and Jeremy M. Kronick To: Canadians Worried About Inflation Date: April 25, 2022 Re: You Cannot Fight Inflation on the Downlow With inflation on the rise, the Bank of Canada kicked its tightening cycle into high gear with a 50-basis-point increase in the target for its overnight rate – the first non-25-point hike in more than […]John Lester – Who Will Pay for the Pandemic-Induced Debt?
From: John Lester To: Canadians Hoping for a Fiscally Responsible Federal Government Date: April 21, 2022 Re: Who Will Pay for the Pandemic-Induced Debt? “We are absolutely determined that our debt-to-GDP ratio must continue to decline,” said Finance Minister Chrystia Freeland in her budget speech this month. “Our deficits must continue to be reduced. The […] Don Drummond – The 2022 Federal Budget Measures Misaligned with Needs
From: Don Drummond To: Finance Minister Chrystia Freeland Date: April 20, 2022 Re: The 2022 Federal Budget Measures Misaligned with Needs A common reaction to the 2022 federal budget is “not as bad as expected.” What kind of evaluation is this? Faint praise simply because fears of massive new spending did not materialize? But that fear was stoked by […] The Bank of Canada’s rate hike: You can’t fight inflation on the QT – Financial Post Op-Ed
With inflation on the rise, the Bank of Canada kicked its tightening cycle into high gear Wednesday by announcing a 50-basis-point increase in its target for the overnight rate — the first non-25-basis-point hike in over 20 years. It also modified its stance concerning its over-sized holdings of Government of Canada bonds, which swelled its balance sheet during so-called Quantitative Easing (QE). Those days are over: it will now initiate Quantitative Tightening, or QT, by not replacing bonds on its balance sheet as they mature, thus reducing its bond holdings over time.
Some might be disappointed the bank didn’t go further on QT by announcing it would actually start selling its holdings of government bonds. Not to worry.…
Zelmer, Kronick – Cryptocurrencies No Defence Against Inflation
From: Mark Zelmer and Jeremy M. Kronick To: Canadian Crypto Watchers Date: April 14, 2022 Re: Cryptocurrencies No Defence Against Inflation People have many buoyant expectations of cryptocurrencies as they look for ways to conduct their financial affairs outside the traditional financial system. They hope that, as crypto and its supporting blockchain technology mature, there will eventually be no […] Can cryptocurrency protect you from inflation? – Globe and Mail Op-Ed
People have many happy expectations of cryptocurrencies as they look for ways to conduct their financial affairs outside the traditional financial system. They hope that, as crypto and its supporting blockchain technology mature, there will eventually be no delays in settling their transactions, cheaper cross-border transactions and no pesky fees on bank accounts, among other advantages.
Many also imagine that crypto assets can protect them from rising inflation. That, however, is one benefit crypto assets do not offer.
Crypto assets such as bitcoin and ethereum and their decentralized blockchain technology offer the promise that, at some point in the future, it may be possible to price goods and services and have one’s…
C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Raise Overnight Rate to 1.00 Percent Next Week and 2.25 Percent in a Year’s Time, and Shrink Bond Holdings
April 7, 2022 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada raise its target for the overnight rate, its benchmark policy interest rate, by 50 basis points to 1.00 percent on April 13th. The MPC recommends further increases over the coming year: to at least 1.25 percent in June, 2.00 by October, and 2.25 percent by April 2023. It also recommends that the Bank reduce its holdings of Government of Canada bonds between now and its May overnight-rate target announcement.
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…
William B.P. Robson – The Federal Gas Pedal Meets Bank of Canada Brakes
From: William B.P. Robson To: Canadians Worried About a Hard Landing Date: April 6, 2022 Re: The Federal Gas Pedal Meets Bank of Canada Brakes With inflation pushing 6 percent, and federal debt up about half-a-trillion dollars in two years, Canadian macroeconomic policy is a mess. It will get worse. The Bank of Canada is moving to get inflation […] On inflation, the government and the Bank of Canada are pulling in opposite directions – Globe and Mail Op-Ed
With inflation pushing 6 per cent, and federal debt up about half-a-trillion dollars in two years, Canadian macroeconomic policy is a mess. It will get worse. The Bank of Canada is moving to get inflation down – applying the brakes. The federal government’s budget this week will show tens of billions more borrowing and spending – foot firmly on the gas. Monetary tightening and fiscal excess prefigure a wild economic ride ahead. Perhaps a recession.
Saying “recession” might seem alarmist. The economy is on a tear. Employment is well above, and unemployment well below, where they were pre-COVID. Economywide spending rose an eye-popping 12 per cent over the past year.
The problem, though, is that this surge owes so much to…