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

Time for the Bank of Canada to make a hard choice – Financial Post Op-Ed

I first heard the gibe that “central bankers think inflation is always and everywhere a monetary phenomenon – except this time, of course” more than 50 years ago, but it is still as good as new.

Consider the Bank of Canada, now caught in a trap of its own making. Its mandate, pending an imminent renewal, requires it to maintain inflation in a range around two per cent, but its “forward guidance,” issued incessantly for the past year, has promised to keep the overnight rate of interest at 0.25 per cent until the real economy has returned to “normal” — at a date that lately seems to have been creeping closer from its original value somewhere around the end of 2022. The Bank is stuck with two quantitative targets, one, an inflation…

The Bank of Canada’s inflation target: Stick with what works – Financial Post Op-Ed

Inflation has risen to almost five per cent and the year-end deadline for the federal government and the Bank of Canada to announce a new monetary policy framework is barely three weeks away. Should we be nervous?

Since 1991, the framework has been an inflation-control target, and since the end of 1995 that target has been two per cent. That system has been a striking success. The CPI’s average increase over the 25 years from 1995 until the onset of the pandemic was 1.9 per cent annually. Previous five-year renewals of the inflation-control agreement were quiet affairs with only minor tweaks.

Not so this time. COVID’s hit to productive capacity has combined with massive monetary and fiscal stimulus to push inflation well…

William B.P. Robson – The Lasting Harm of ‘Transitory’ Inflation

C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Hold Overnight Rate at 0.25 Percent Next Week, Hike to 1.00 Percent Next Year, Shrink Bond Holdings

December 2, 2021 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada keep its target for the overnight rate, its benchmark policy interest rate, at 0.25 percent through next January, before raising it to 0.75 percent by June of 2022, and to 1.00 percent by December of 2022. It also recommends that the Bank reduce its holdings of Government of Canada bonds between now and its next overnight-rate target announcement in January.

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…

Two Sides of the Same Coin: Why Stablecoins and a Central Bank Digital Currency Have a Future Together

The “Demand Stabilization Mechanism”: Using Temporary GST Cuts as Automatic Fiscal Policy

‘Transitory’ inflation does lasting harm – Globe & Mail Op-Ed

Wednesday’s inflation report from Statistics Canada showed October’s consumer price index up 4.7 per cent from a year earlier. We are still hearing about “transitory” inflation from many forecasters and central bankers. Canadians dismayed by recent higher prices for food, energy, appliances and much else should not take much reassurance from this term.

Many transitory events – storms, pandemics, recessions – leave lasting effects. With the benefit of hindsight, the inflation from the mid-1960s to the early 1990s was transitory. It came and went. Two-per-cent inflation was common until 1965 and became an official Bank of Canada target after 1995. But between those two dates, the consumer price index more than quintupled. The…

Ambler, Kronick – The Bank of Canada’s Welcome Inflation Blink

Inflation and the Bank of Canada: the Bank blinks – Financial Post Op-Ed

On Wednesday, the Bank of Canada left its target for the overnight interest rate at 25 basis points and ended its quantitative easing (QE) program, which, through purchases of government bonds, had more than quadrupled its balance sheet. This was the right call given what now seems to be persistent underlying inflation.

From now on, the Bank will only purchase government bonds to replace ones that mature. Its balance sheet will stay high compared to its pre-pandemic level but, in theory, won’t grow further. Tightening monetary policy to deal with inflation above target can now come in only one of two forms: shrinking the balance sheet by selling or not replacing maturing government bonds or, more likely, hiking the overnight…

C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Hold Overnight Rate Target at 0.25 Percent Next Week, Hike to 1.00 Percent Next Year, Cut Bond Purchases

October 21, 2021 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada keep its target for the overnight rate, its benchmark policy interest rate, at 0.25 percent through December, before raising it to 0.50 percent by April of 2022, and to 1.00 percent by October of 2022. It also recommends that the Bank reduce its quantitative-easing purchases of Government of Canada bonds from the current pace of $2 billion per week.

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…

Entre Charybde et Scylla – La Press Opinion

Les banques centrales s’approchent du dangereux passage entre Charybde et Scylla, les monstres marins de la mythologie grecque qui menaçaient les navires. Sauf que les écueils d’une faible croissance et de l’inflation sont bien réels.

La relance économique est enclenchée. Le Québec, pour l’un, a retrouvé son niveau de PIB d’avant pandémie dès mars. Mais ici comme ailleurs, cette reprise est encore mal assurée et inégale, comme on le voit dans les services livrés en proximité avec la clientèle.

L’inflation est manifeste, provoquée en grande partie par la perturbation des chaînes d’approvisionnement mondiales causée par la COVID-19, ce qui suggère qu’elle serait transitoire. Mais si les goulots d’étranglement persistent, ce…