Ambler, Kronick – The Bank That Didn’t Bark

Where’s the hike? Why didn’t the Bank of Canada act? – Financial Post Op-Ed

In a surprise move, the Bank of Canada kept its overnight rate target steady at 25 basis points Wednesday. Markets had already priced in a rate increase by the time the announcement was made, so there was ample cover to make this the first post-pandemic increase. That didn’t happen. With inflation rising at home and abroad, we believe this was a missed opportunity.

Steady increases in inflation and inflation expectations had led markets to believe the bank was set to increase its target for the overnight rate for the first time since the pandemic began. Headline inflation was up to 4.8 per cent in December, all of the bank’s core inflation measures had increased — with two of the three at or above three per cent — and its…

William B.P. Robson – Canada Needs to Take its Anti-Inflation Medicine Early

Ed Devlin on BNN – When you’re at a lower bound of interest rates, deflation is a greater problem than inflation

Ed Devlin, Founder of Devlin Capital, Senior Fellow at C.D. Howe Institute, and former Head of Canadian Portfolio Management at PIMCO, joins BNN Bloomberg to provide his reaction to the Bank of Canada’s decision to hold interest rates steady. He says that keeping the rates will give the bank more options to deal with the uncertainties of the pandemic.

C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Raise Overnight Rate, Shrink Bond Holdings

January 20, 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, to 0.50 percent at its next announcement on January 26th. The Council recommended further increases over the coming year, with the target reaching 1.50 percent by January of 2023. It also recommends that the Bank reduce its holdings of Government of Canada bonds prior to its next overnight rate target announcement in March.

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…

Zelmer, Kronick – Is This Going to Be the Year for Crypto?

It’s painful. But the sooner we reduce inflation, the better – Globe and Mail Op-Ed

We have not seen inflation this high in Canada for decades. With it has come a resurgence of arguments not heard for many years, both about the causes of inflation and whether we should reduce it.

These arguments will be fierce. Getting inflation back to the 2-per-cent target set by the Bank of Canada will mean tighter monetary policy, including higher interest rates. That will hurt – but inflation hurts more. The sooner we settle on what to do about it, the easier reducing it will be.

Disagreement about what causes inflation matters. After all, if inflation were not related to monetary policy, asking the central bank to fix it would make no sense. Higher prices at stores or in Statistics Canada reports often seem…

William B.P. Robson – Interest Rate Hikes Are Coming

Ambler, Kronick – Will Ending Supply Bottlenecks Solve Inflation?

The Bank of Canada’s mandate: steady as she goes – Financial Post Op-Ed

On Monday the Bank of Canada and Government of Canada finally announced the renewal of their agreement concerning the country’s monetary policy framework. The announcement reconfirmed their joint commitment to the two per cent inflation target within a band of one to three per cent. With the current agreement expiring at the end of the month, the down-to-the-wire announcement had led some pundits to expect a major surprise, and even in the follow-up coverage there are hints some believe this is what happened. We do not see it that way – which is good. The Bank’s mandate remains essentially unchanged from the last renewal, and from renewals all the way back to 1995 when the two per cent inflation target was first implemented. Extending…

Brace for impact: Rate hikes are coming – Globe and Mail Op-Ed

Bank of Canada governor Tiff Macklem, like U.S. Fed chairman Jerome Powell, is clearly starting to view continuing high inflation with concern. A change is coming in monetary policy. With demand outrunning supply, our central banks’ policy interest rates need to rise – and may rise a lot.

Before COVID-19 triggered a monetary explosion, inflation in Canada and the United States had been so low for so long that most people could ignore it, and ignore monetary policy as well. Inflation was reliably close to 2 per cent year after year. The Bank of Canada’s overnight rate, its benchmark policy rate, and the U.S. equivalent, the Fed Funds rate, moved much less than they had when inflation was high and variable. How central bank policy…

Ambler, Kronick, Robson – Down to the Wire on the Monetary Policy Framework