Bafale, Kronick, Robson – Monetary Policy Is Our Only Inflation Fix

Only tighter money can keep the dollar from shrinking – Financial Post Op-Ed

What explains surging inflation in Canada and many other advanced economies? Most commentators — correctly — blame loose monetary policy. That contrasts with the 1970s and 1980s, when many people argued inflation was not something central banks could control and that tight money was therefore a case of pain for no gain. With the Bank of Canada and other central banks beginning to tighten, those arguments may return. If they prevail, monetary policy will stay too loose and inflation will keep raging.

Inflation is another term for a persistent decline in the value of money, which like most values is determined by supply and demand. If the Bank of Canada promotes growth in the supply of Canadian dollars that exceeds growth in the…

Canada has blown through our fiscal guardrails. When will our federal budgets reflect that? – Globe and Mail Op-Ed

The budget that federal Finance Minister Chrystia Freeland will present shortly will reveal whether the government is serious about putting the national finances on to a sustainable track.

There is room for doubt. Since 2015, the government had been running deficits larger than it promised, and larger than a strong economy justified. Then it responded to the COVID-19 pandemic with debt-financed spending on an unprecedented scale.

To assuage concerns about soaring federal debt – concerns heightened by the government’s equally unprecedented failure to present a budget at all in 2020 – the Finance Minister introduced a new concept in the government’s fall economic statement that year: fiscal…

Ambler, Kronick – The Upward Rate March

S4 E4: Getting Serious Shadow Budget 2022 with Bill Robson

Oceans of liquidity mean rates will have to keep rising – Financial Post Op-Ed

The Bank of Canada’s decision on Wednesday to start raising its target for the overnight rate of interest reflects its recognition that inflation has turned out to be higher and more persistent than it had been expecting, and that slack in the economy has now been absorbed, also faster than expected: as recently as December the bank had predicted slack would persist until the middle of this year.

Wednesday’s announcement stressed supply-side factors as the main reasons for high inflation: poor harvests and higher transportation costs, and higher energy and food-related commodity prices resulting from the invasion of Ukraine.

But there is another, often-neglected, demand-side factor that will…

Le délicat virage de la Banque du Canada – La Presse Opinion

À 5,1 %, l’inflation est au plus haut depuis 30 ans, bien au-delà de la cible de 2 %. Malheureusement, il n’y a rien que le Banque puisse faire pour juguler l’inflation actuelle. Les changements de taux prennent de 18 mois à deux ans pour produire leurs pleins effets.

L’annonce des premières augmentations de 25 points de base (100 points égalent 1 %) aura avant tout un but psychologique : montrer que la Banque est déterminée à mater l’inflation. Le gouverneur Tiff Macklem veut éviter qu’elle ne s’incruste dans les esprits et ne modifie durablement les comportements.

Des sondages auprès des consommateurs et des entreprises, ainsi que le marché à terme des taux d’intérêt, reflètent encore l…

William B.P. Robson – Inflation May Be a Surprise – Higher Interest Rates Should Not Be

Higher inflation was a surprise. Higher interest rates should not be – Financial Post Op-Ed

Statistics Canada’s inflation report last week showed the consumer price index up 5.1 per cent year-over-year in January – more than forecasters and markets expected and more than the Bank of Canada’s latest projections implied. That’s not new: the CPI has risen more than expected most of the past year.

Expectations about how the Bank of Canada will raise its target for the overnight rate in response have also moved up – somewhat. Few forecasters and investors seem to expect an overnight rate above two per cent, at least not until well into 2023. But Canadians would be wise to prepare for an overnight rate of three per cent or more well before that.

The prospect of interest rates being higher than expected follows directly…

Zelmer, Kronick – Let’s Not Roll Out QT on the QT

Ambler, Kronick – Decisions Deferred Mean Trouble to Come

Robson, Wu – Canada’s Investment Imperative: Stronger Business Investment. Can We Get It?