For the Bank of Canada, the hard part begins now – Financial Post Op-Ed

The Bank of Canada recently announced an end to two short-term lending programs it introduced at the start of the pandemic. Their winding down is welcome news: it means the bank has been successful in stabilizing financial markets. But now comes the tricky part: encouraging economic expansion, which traditionally is inflationary, even while reassuring buyers of Canadian governments’ bonds it will not help these governments inflate away the debts they are incurring.

Key to such a strategy is recommitting, alongside the federal government, to the two per cent inflation target, even as short-term tactics may require temporary overshooting of it. Sticking with a target you may decide to miss temporarily is a mixed message, meaning…

Bank of Canada Should Keep Overnight Rate at 0.25 Percent and Maintain Government Bond Purchases: C.D. Howe Institute Monetary Policy Council

October 22, 2020 – 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 October of 2021. A majority of MPC members recommended that the Bank of Canada continue its quantitative easing program of Government of Canada bond purchases.

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. The Council’s principal recommendations are about the overnight rate target. Members make recommendations for the Bank of Canada’s upcoming interest-rate…

For the Bank of Canada, what does the link between monetary policy and inequality mean? – Globe and Mail Op-Ed

A global pandemic that has crushed the economy. A stock market improbably rising in an economic downturn. Is it the job of the Bank of Canada to address this contradiction, and the inequality that arises?

Not directly, but the link between monetary policy and inequality is very real and affects the ability of the central bank to reliably hit its 2-per-cent inflation target.

In March and April, when we went into complete lockdown because of the COVID-19 pandemic, GDP fell more than 18 per cent, the largest two-month economic decline on record. A myriad fiscal policies were put in place, including household income supports, such as the Canada Emergency Response Benefit, and business supports, such as the Canadian Emergency…

Canadian Monetary Policy in the Time of COVID-19

Le Coït Interrompu De La Banque Du Canada – La Presse Opinion

D’habitude, les révisions quinquennales de la cible de la Banque du Canada suscitent un long bâillement, sauf pour les mordus de la politique monétaire qui ressentent le petit frisson d’un changement possible, mais toujours déçu, tel un coït interrompu.

Les crises qui se succèdent et l’essoufflement de la politique monétaire et de son outil – le taux d’intérêt – suggèrent des ajustements plus significatifs cette fois-ci, sans aller jusqu’à brûler les manuels de macroéconomie.

Peintes en nuances subtiles, les décisions sur les objectifs et les moyens utilisés par la banque centrale exercent néanmoins un effet puissant sur le bien-être de tous, sur le pouvoir d’achat, sur l’emploi et sur la création de richesse. En période…

Kronick, Ambler – Average Inflation Targeting: Is It Right For Canada?

Should the Bank of Canada follow the Fed’s inflation policy shift? – Financial Post Op-Ed

On Aug. 27, the U.S. Federal Reserve Board announced an important modification of its monetary policy framework, moving towards “average-inflation targeting” (AIT). As the Fed’s announcement said: “following periods when inflation has been running persistently below two per cent, appropriate monetary policy will likely aim to achieve inflation moderately above two per cent for some time.” The obvious question for Canadian policy-makers is whether the Bank of Canada should follow suit. Our answer is: Perhaps, but the bar for changing the policy regime should be set high.

As the name suggests, under “average-inflation targeting,” the central bank’s target would be the average inflation rate over a specified time, say three years.…

Helicopter money from the Bank of Canada is a bad idea – Financial Post Op-Ed

Looking for more tools that the Bank of Canada can use to help our COVID-stricken economy recover, some observers argue for “going direct,” having the Bank of Canada “print money” and deliver it directly to households as transfers. In our view, that is a bad idea.

Broadly speaking, the Bank of Canada can “go direct” in two ways. One is to transfer extra funds directly to the general public — a technique often described as a “helicopter drop.” Imagine squadrons of helicopters flying over the country dropping cash out their loading bays. In fact, neither helicopters nor, for the most part, cash would be involved: rather, the Bank of Canada would send people cheques or make direct deposits into their bank accounts — a one-for-one,…

Kronick, Ambler – Parting Ways: The Bank Of Canada Holds Steady, The Fed Experiments

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Paul Jenkins – The Long … And The Short Of Finding Equilibrium

Ambler, Kronick – The GDP Story Is Not As Bleak As Reported