Weighing the Options: Why the Bank of Canada Should Renew Inflation Targeting
By: Stephen Williamson The Study In Brief Leading up to the Bank of Canada’s 2021 renewal of its agreement with the government of Canada, this Commentary evaluates alternatives to the Bank’s current inflation-targeting agreement, and recommends that the agreement continue in its present form. The important elements of monetary policy are the central bank’s mandate, its goals, […] 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.
Bank of Canada Should Hold Overnight Rate at 0.25 Percent, Reduce Government Bond Purchases: C.D. Howe Institute Monetary Policy Council
April 15, 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 its next policy rate announcement on April 21st, but reduce its purchases of Government of Canada bonds below $4 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 subsequent announcement, and the announcements six months and one year ahead. The Council’s formal…
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,…
S3 E7: Modern Monetary Theory with Farah Omran and Mark Zelmer
Times of crisis open the door to new economic theories. As governments inflate debt to address them, talk about Modern Monetary Theory has grown into a chorus in some circles – particularly as the Americans discuss the “Green New Deal.” But as report authors Farah Omran and Mark Zelmer tell host Michael Hainsworth, Modern Monetary […] Don’t be alarmed as the Bank of Canada begins its COVID withdrawal – Financial Post Op-Ed
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 pandemic a year ago led the bank to buy the debt of provincial governments and private companies. Those stresses are now in the past and Canadians should welcome the bank’s retreat from a role fraught with economic and political risks.
The programs covered by the announcement include the Commercial Paper Purchase Program, the Provincial Bond Purchase Program, and the Corporate Bond Purchase Program. The Bank established these programs when liquidity in the markets for these securities dried up a year ago. The programs were very successful:…
Le Bonhomme Sept Heures Effraie Les Marchés – La Presse Opinion
On le croyait mort, mais certains l’ont vu rôder. Plusieurs prédisent son retour prochain. D’autres en font plutôt des gorges chaudes. L’inflation est redevenue le bonhomme Sept Heures des marchés financiers.
Ce n’est pas tant l’augmentation du coût de la vie qui préoccupe les financiers, par ailleurs bien payés, mais l’effet négatif qu’elle pourrait avoir sur les taux d’intérêt et par-delà, sur leurs investissements. L’inflation soulève aussi un questionnement sur le financement de la dette publique.
Ces derniers temps, l’afflux des bonnes nouvelles énerve les marchés. Aux États-Unis, ils notent l’accélération de la vaccination, le gigantesque stimulus budgétaire et un taux d’épargne très élevé. Cet été, les…
The Bank of Canada needs to manage inflation expectations – Financial Post Op-Ed
The Bank of Canada stuck to the status quo last week, leaving its target for the overnight interest rate at 25 basis points and maintaining quantitative easing (QE) at a rate of at least $4 billion of bond purchases per week. But it did so in the context of higher inflation and a stronger-than-expected economy. With good news on the vaccination front and the prospect of more economic activity in the near term, there is reasonable concern the recent rise in inflation is more than just a one-off rebound from depressed prices a year ago. The Bank’s challenge now is to manage, not just inflation, but inflation expectations, as well.
Year-over-year headline inflation increased from 0.7 per cent in December to 1.0 per cent in January,…
The Impact of Monetary Policy on Financial Stability
Easy Money Unlikely to Cause Financial Instability in Canada On the heels of the Bank of Canada reiterating they will keep interest rates low, authors Jeremy Kronick and Steve Ambler explore the effect monetary policy has on financial stability and consider whether Canadians should be worried about the impact of low interest rates. To study […] Is Inflation Back? It’s Not An Economic Question, It’s Political – Globe And Mail Op-ed
Suddenly, inflation is in the news. In Canada and abroad, spending is surging and COVID-impaired production is struggling to keep up. Key commodities – oil, lumber and metals – are expensive.
It is front-of-mind in financial markets as well. The yield on the federal government’s 30-year bonds, which was below 0.9 per cent last August, topped 2.0 per cent last week – well above its pre-pandemic level.
Do these headlines and fears represent overreactions to rogue statistics and possible minor tactical shifts by central banks? Or is something more fundamental happening? Will politicians who won’t stop spending more than they tax end up forcing central banks to print money to cover the difference?
Current indicators and…