Bank of Canada Should Keep Overnight Rate at 0.25 Percent, Support Financial Market Stability through COVID-19 Crisis: C.D. Howe Institute Monetary Policy Council
April 9, 2020 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada maintain its target for the overnight rate, its benchmark policy interest rate, at 0.25 percent for at least a year.
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 President and 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.
Although the votes for individual members varied somewhat (see table), reflecting the unusual crisis-…
Jenkins, Kronick – Covid-19: A Macroeconomic Narrative
From: Paul Jenkins and Jeremy M. Kronick To: Canadians Looking to Understand the Times Date: April 2, 2020 Subject: COVID-19: A Macroeconomic Narrative These are highly uncertain times, as we individually and collectively face the challenges of COVID-19. With the many complexities – both health and economic related – is there a simple narrative that […] Time of the Essence for CEBA: Crisis Working Group on Monetary and Financial Measures
April 1, 2020 – The C.D. Howe Institute’s Monetary and Financial Measures Working Group, supported by a group of financial market experts, and co-chaired by former Governor of the Bank of Canada David Dodge and former Deputy Superintendent of OSFI Mark Zelmer, held its second meeting on Monday, March 30, 2020.
The working group agreed that, while there is a need for governments and central banks to monitor the effect of current crisis measures on debt and potential future inflation, these concerns are not a short-run issue and should not come at the expense of the immediate need for large-scale fiscal stimulus. To that end, the Monetary and Financial Measures Working Group recommends the following:
Quickly…Ambler, Kronick – Financing The Covid Deficit: Short And Long Runs
To: Government debt watchers From: Steve Ambler and Jeremy M. Kronick Date: March 31, 2020 Re: Financing the COVID Deficit: Short and Long Runs The federal government is ramping up spending to counteract the economic impact of the coronavirus. The Parliamentary Budget Office has predicted a deficit of more than $110 billion this year. And […] William White – The Recession And The Pandemic: Cause Or Trigger?
From: William White To: Canada’s COVID Policymakers Date: March 26, 2020 Re: The Recession and the Pandemic: Cause or Trigger? The pandemic and the decision to use social distancing to combat it, have already sparked a global recession. A “V” shaped recovery is plausible but, should the recession destabilize an increasingly indebted global economy, a worse outcome can be […] Enhanced Government Credit Facility Needed: Crisis Working Group on Monetary and Financial Measures
March 25, 2020 – The Institute has established an expert crisis working group for finance and monetary policy, co-chaired by David Dodge, former Governor of the Bank of Canada, and Mark Zelmer, former Deputy Superintendent of OSFI. The group’s first meeting was held on Monday, March 23, 2020.
The crisis working group is calling for an expansive government guaranteed credit facility, in tandem with various fiscal measures, to help Canadians and the business community survive the COVID-19 economic crisis. Possible features of the facility could include:
100% guarantee by the Government of Canada, and available to Canadian firms either through federal and provincially-regulated…Glen Hodgson – What Will A Pandemic Mean For Economic Performance?
From: Glen Hodgson To: Canadians concerned about COVID-19 Date: March 20, 2020 Re: What Will a Pandemic Mean for Economic Performance? The COVID-19 pandemic is having an immediate impact on population health locally and globally, and on the performance of the economy. What can we expect as it unfolds? Pandemic Patterns Pandemics dating back to the Middle […] Kronick, Ambler – The Path Forward For The Bank Of Canada
To: Governing Council at the Bank of Canada From: Jeremy M. Kronick and Steve Ambler Date: March 18, 2020 Re: The Path Forward for the Bank of Canada As economists, rather than epidemiologists, infectious-disease doctors or tea-leaf readers, we cannot tell readers whether this pandemic will end in three weeks, three months, or later. But […] S2 E5 – COVID-19 Emergency Response Package
Analysis of Ottawa’s $82 billion emergency response package from the C.D. Howe Institute’s Vice President of Research Daniel Schwanen and Associate Director of Research Grant Bishop reveals encouraging support for gig economy workers, struggling homeowners, and small and medium-sized businesses. But is it coming soon enough? Hodgson, Schwanen: Looking Beyond Macro-Economic Policies to Address Consequences of COVID-19
From: Glen Hodgson and Daniel Schwanen To: Canadians concerned about COVID-19’s economic impact Date: March 16, 2020 Re: Looking Beyond Macro-Economic Policies to Address Consequences of COVID-19 COVID-19 is causing a sharp and immediate disruption to economic activity, and the drastic measures needed to slow its further spread have created a negative ripple effect across the global economy. The […] Ambler, Kronick – The Covid-19 Monetary Policy Problem
From: Steve Ambler and Jeremy M. Kronick To: Bank of Canada Watchers Date: March 13, 2020 Re: The COVID-19 monetary policy problem The Bank of Canada was right to cut interest rates last week, but 25 basis points rather than 50 would have kept valuable firepower in reserve in case, as seems likely, it’s needed in coming weeks. […] Bank of Canada should have kept more of its powder dry in case things get worse – Financial Post Op-Ed
The Bank of Canada was right to cut interest rates last week but it may have been wiser to reduce them by only 25 basis points rather than 50 and thus keep more firepower in reserve in case it’s needed in coming weeks.
The Bank likely was leaning heavily towards an interest rate cut even before the Fed’s unscheduled and surprising 50 basis point federal funds rate cut last Tuesday. That might have given the Bank the final nudge to follow suit in its regularly scheduled rate decision a day later. Given the complexity of COVID-19, a cut of at least 25 basis points was likely the right call. The key was to move swiftly and decisively, which the Bank did. The only uncertainty was whether it would take as drastic a step as the Fed. In…