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
From: Jeremy M. Kronick and Steve Ambler To: Central bank watchers Date: September 15, 2020 Re: Parting Ways: The Bank of Canada Holds Steady, the Fed Experiments The two most recent announcements by the Bank of Canada and the US Fed are a study in contrasts. The Fed’s major shift in its monetary policy framework should be met with […] S2 E15: The Need for Fiscal Anchors with John Manley and Janice MacKinnon
The C.D. Howe Institute’s Fiscal and Tax Working Group is urging Ottawa to recommit to the idea of fiscal sustainability. As former finance ministers John Manley and Janice MacKinnon tell host Michael Hainsworth, the federal government can’t do the heavy lifting of restarting the economy on its own. Paul Jenkins – The Long … And The Short Of Finding Equilibrium
From: Paul Jenkins To: Canada’s Economic Policymakers Date: September 11, 2020 Re: The Long … and the Short of Finding Equilibrium Macroeconomics is about optimizing long-run equilibrium conditions (e.g., full employment), and re-establishing those conditions as quickly as possible through short-run stabilization policies in response to unanticipated shocks. From this perspective, where are we today […] Ambler, Kronick – The GDP Story Is Not As Bleak As Reported
From: Jeremy Kronick and Steve Ambler To: Bank of Canada Watchers Date: September 10, 2020 Re: The GDP Story is Not as Bleak as Reported Statistics Canada released its initial estimate of second-quarter GDP last month. Output dropped by 11.5 percent compared with the first quarter and by a little more than 13 percent compared with the second quarter […] La Fièvre De L’or – La Presse Opinion
Je me méfie de l’or qui provoque des poussées de fièvre chez les spéculateurs. Mais avec les taux d’intérêt cloués au plancher, certains investisseurs sérieux considèrent maintenant le métal jaune pour remplacer partiellement les obligations dans leur portefeuille, car celles-ci ne parviennent plus à jouer pleinement leur rôle stabilisateur.
En début de carrière, lorsque je faisais mes dents dans le journalisme économique, j’ai probablement trop rencontré de petits promoteurs miniers et de gold bugs, ces adorateurs du métal précieux qui, bien avant les furieux adeptes du bitcoin, voient dans l’or, les conserves et les armes à feu, des moyens de survie après l’effondrement de la civilisation et de la monnaie.
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Bank of Canada Should Keep Overnight Rate at 0.25 Percent and Maintain Federal Bond-Buying Program: C.D. Howe Institute Monetary Policy Council
September 3, 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 September of 2021. Most MPC members also recommended that the Bank of Canada continue its quantitative easing program through the period until its next overnight rate announcement on October 28th.
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…
“Going Direct”: Not a New Tool, But an Old Pitfall for the Bank of Canada
The Study In Brief In response to the COVID-19 pandemic, the Bank of Canada has cut the overnight rate to 0.25 percent, the threshold it sees as the lower bound for its main policy instrument. At the lower bound, the Bank can no longer use its most direct tool to influence economic activity. The federal government […] Stephen Williamson – Three Questions About Bank Of Canada Balance Sheet Expansion
From: Stephen Williamson To: Central bank watchers Date: August 11, 2020 Re: Three Questions about Bank of Canada Balance Sheet Expansion Given the unprecedented challenges of a global pandemic, the Bank of Canada has implemented some unconventional policies, with the goal of mitigating the economic effects of COVID-19 and the associated economic constraints. First, the […] Kronick, Ambler, Robson – Welcome Clarity About Monetary Policy In Pandemic Times
From: Jeremy Kronick, Steve Ambler and William B.P. Robson To: Bank of Canada watchers Date: July 30, 2020 Re: Welcome Clarity about Monetary Policy in Pandemic Times Amid the health and economic stresses of the coronavirus pandemic, clarity from public officials is especially valuable. The July Monetary Policy Report (MPR) from the Bank of Canada was a model. […] In the pandemic fog, some welcome clarity from the Bank of Canada – Financial Post Op-Ed
Last Wednesday’s interest rate announcement and Monetary Policy Report (MPR) from the Bank of Canada were the first under new governor Tiff Macklem. They provide welcome clarity on the bank’s thinking about the economic impact of the coronavirus pandemic and how monetary policy should respond
Back in March, the bank cut its traditional policy instrument, the target overnight interest rate, to 25 basis points, alongside heavy interventions in financial markets to provide liquidity. The high degree of uncertainty associated with the virus and the ensuing economic lockdown led the bank to be vague in its accompanying commentary, including the key question of how it intended to hit its two per cent inflation target. The April MPR did…