Key questions about Canadian monetary policy are causing concern – Globe and Mail Op-Ed
On Wednesday, the Bank of Canada left its target for the overnight rate at 0.25 per cent, and kept its purchases of Government of Canada bonds at $3-billion per week. Forecasters and financial market participants expected these announcements, and took them in stride. Below the calm surface, though, a couple of key questions about Canadian monetary policy are causing concern.
One is about where inflation is going. The year-over-year increase in the consumer price index (CPI) hit 3.4 per cent in April, its highest reading in a decade, and above the 1- to 3 -per-cent acceptable range the central bank has for its 2-per-cent target. The bank’s statement on Wednesday emphasized that such above-target CPI increases are temporary. When…
COVID-19: The C.D. Howe Institute’s Complete Policy Analysis
As the COVID-19 crisis continues to unfold, C.D. Howe Institute experts have been busy tackling the policy challenges that the global pandemic has created. On this page, readers can find our most recent reports from our Crisis Working Groups, Intelligence Memos, op-eds, media appearances and more addressing the issues affecting Canadians and the economy in these troubled times. Data and […] À Force De Crier Au Loup De L’inflation, Va-t-il Surgir ? – La Presse Opinion
En matière d’inflation, il se peut qu’à force de crier au loup, la bête surgisse pour de vrai. Il suffit que tout le monde y croie et se comporte comme tel, pour que l’inflation apparaisse.
A contrario, si tous les agents économiques pensent que l’inflation restera en moyenne à 2 %, il y a de bonnes chances que cette conviction s’autoréalise. D’où, pour une banque centrale, l’importance névralgique de l’ancrage des anticipations.
J’exagère un peu, mais pas tellement. De fait, l’économie est toujours balayée par des vents contraires qui poussent l’inflation à la hausse ou à la baisse. Mais si les anticipations sont bien arrimées, la banque centrale n’aura pas à beaucoup changer son taux directeur pour que les…
Ed Devlin on BNN – BoC Addressing Climate Change Risks to Financial System is Wise
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 after the BoC conference detailing the state of Canada’s financial system. Devlin says he is surprised the majority of the questions posed were about the housing market as it’s not the only variable in changing monetary policy.
Ambler, Kronick, Robson – The Bank Of Canada’s Government Bond Purchases: The Case For Less
From: Steve Ambler, Jeremy M. Kronick and William B.P. Robson To: Bank of Canada Watchers Date: May 4, 2021 Re: The Bank of Canada’s Government Bond Purchases: The Case for Less The Bank of Canada is lowering its purchases of federal government debt from at least $4 billion a week to $3 billion a week. It has presented this […] Glen Hodgson – The Coming End Of Libor: Adaptation Required
From: Glen Hodgson To: Canadian business borrowers and lenders Date: April 30, 2021 Re: The Coming End of Libor: Adaptation Required The widely-used global interest rate benchmark, Libor, is coming to an end, to be replaced by a more decentralized system of reference rates for various currencies that more accurately reflect the interest rate on a risk-free transaction […] The Bank of Canada’s $3-billion-a-week bond habit – Financial Post Op-Ed
Last week, the Bank of Canada announced it was lowering its purchases of federal government debt from at least $4 billion a week to $3 billion a week. The Bank presented this change as a response to positive economic news that, it noted, could also lead to an increase in its target for the overnight rate of interest in the second half of 2022, earlier than it had previously discussed. But with the Bank projecting economic growth of 6.5 per cent for 2021 and inflation above target at the end of the projection period, the question has to be asked: why is the Bank still buying any of the government’s debt?
When it started buying bonds as part of its quantitative easing (QE) program last year, the Bank was concerned about…
Weighing the Options: Why the Bank of Canada Should Renew Inflation Targeting
Central Bank’s Inflation Targeting Doesn’t Need Overhaul In this report, leading monetary economist Stephen Williamson evaluates the alternatives to the Bank’s current inflation-targeting agreement, and finds that none of the other options are likely to improve upon the current agreement that has served Canada well since 1991. Williamson concludes the Bank of Canada should not […] Ed Devlin on BNN – Bank of Canada Policy Rate Decision
The Bank of Canada is keeping its overnight lending rate unchanged at 0.25 percent. The central bank is signaling a 2022 rate hike, and reducing its weekly asset purchases to $3B per week. 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 weigh in.
Mark Zelmer – Beware The Seduction Of Modern Monetary Theory
From: Mark Zelmer To: Policymakers in Ottawa Date: April 12, 2021 Re: Beware the Seduction of Modern Monetary Theory The massive increase in government spending in Canada and around the world in response to COVID-19 has been accompanied by the siren song of Modern Monetary Theory, the fashionable economic thesis that predates the pandemic. We need to turn a […] Ambler, Kronick, Robson – A Welcome Retreat By The Bank Of Canada
From: Steve Ambler, Jeremy M. Kronick, and William B.P. Robson To: Bank of Canada Watchers Date: April 6, 2021 Re: A Welcome Retreat by the Bank of Canada On March 23, the Bank of Canada announced the upcoming suspension of some of its major asset-purchase programs. This is good news. Financial stresses at the beginning of the […] Beware the siren song of Modern Monetary Theory – Financial Post Op-Ed
The massive increase in government spending in Canada and around the world in response to the COVID-19 pandemic has been accompanied by a siren song in the form of a new economic theory: “Modern Monetary Theory,” or MMT for short. But as we begin to emerge from the acute phase of the pandemic we need to turn a deaf ear to that song. Now that inflation concerns are beginning to stir it is hard to imagine governments raising taxes or cutting spending anytime soon to keep inflation in check — yet that’s how MMT advocates would control inflation, with what traditionally have been regarded as fiscal policies rather than the customary monetary tools of interest rates and liquidity measures.
As I point out with my co-author,…