C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Hold Overnight Rate Target at 0.25 Percent until Fall, Hike to 0.50 Percent by Next July, Reduce Bond Purchases
July 8, 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 at least until January of 2022, and raise it to 0.50 percent by July of 2022. It also recommends that the Bank reduce its quantitative-easing purchases of Government of Canada bonds below its current pace of $3 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 of Canada’s upcoming interest-rate announcement, the…
William B.P. Robson – Brakes, Please, for Your Tag-team Stimulus
To: The Federal Government and Bank of Canada From: William B.P. Robson Date: June 24, 2021 Re: Brakes, Please, for Your Tag-team Stimulus Governments in the advanced economies mounted a massive fiscal response to the COVID crisis. They ramped up spending, mainly on income supports to individuals and businesses, and financed it by borrowing. Central banks also responded on […] Mission Creep and Monetary Policy
by John Murray The Bank of Canada and the Government of Canada will renew their inflation targeting agreement later this year, and a number of proposals have come forward for expanding the mandate of monetary policy beyond its central goal of achieving and preserving price stability. These proposals include suggestions that monetary policy promote a […] Ambler, Kronick, Robson – Taking Inflation Warnings Seriously
From: Steve Ambler, Jeremy M. Kronick, and William B.P. Robson To: Bank of Canada Watchers Date: June 17, 2021 Re: Taking Inflation Warnings Seriously Last week, the Bank of Canada left its target for the overnight rate at 0.25 percent, and kept its purchases of Government of Canada bonds at $3-billion per week. Forecasters and financial market participants […] Our stimulus tag-teams need to cool it – Financial Post Op-Ed
Governments in the advanced economies mounted a massive fiscal response to the COVID crisis. They ramped up spending, mainly on income supports to individuals and businesses, and financed it by borrowing. Central banks also responded on a massive scale. They dropped their policy interest rates close to zero, and their balance sheets ballooned as they bought securities — mainly government debt — and flooded the global financial system with liquidity.
These responses undoubtedly cushioned the COVID blow to our economies. But, more than a year later, especially in the United States and Canada, both fiscal and monetary policy are still in overdrive. It is reasonable to worry that they are going too far.
On the fiscal side, the…
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…