Kronick, Robson – The Bank Of Canada And Covid-19
To: Monetary Policy Watchers From: Jeremy M. Kronick and Bill Robson Date: March 11, 2020 Re: The Bank of Canada and COVID-19 With 50-basis-point cuts in their policy interest rates last week, the Bank of Canada and the US Federal Reserve sharpened debate about how central banks should respond to the threat to our health […] There’s a better barometer for determining Canadians’ financial fragility – Financial Post Op-ed
Over the past 25 years, Canadians’ household debt has increased steadily as a share of their disposable income. During this time, and especially since the financial crisis, they have often been told their debt levels were unsustainable and that a day of reckoning was fast approaching. And yet that day has not come. One reason why seems clear: for the most part over the past 25 years, the amount Canadians spend servicing their debt has not changed as a percentage of their disposable income.
In a recent C.D. Howe Commentary, we argue that it is primarily this “debt service ratio” (interest payments plus reimbursement of principal divided by disposable income) that determines households’ ability to make their payments at…
Bank of Canada Should Cut Overnight Rate to 1.50 Percent Next Week and to 1.25 in April: C.D. Howe Institute Monetary Policy Council
February 27, 2020 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada lower its target for the overnight rate, its benchmark policy interest rate, to 1.50 percent next week. The MPC further recommends that the Bank cut again at its next announcement in April, to 1.25 percent, and hold the target there until early 2021.
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…
Canada’s shadow banks are now too big to ignore – National Post Op-Ed
In Canada the financial services sector weathered the 2007-08 global “credit crunch” better than it did in many other developed countries. One argument for why, certainly in contrast to the U.S., was the smaller size of our “non-bank financial intermediation” (NBFI) sector, more commonly referred to as “shadow banking.” But rapid growth in the shadow sector since the crisis suggests this resilience might be under threat. What does that mean for monetary policy, financial stability and regulation? As it turns out, a lot.
Broadly speaking, the shadow sector includes investment funds, private lenders like mortgage finance companies, companies that offer private-label securitization like asset-backed securities, and more. Shadow…
Predicting Financial Crises: The Search for the Most Telling Red Flag in the Economy
Study in Brief Canada is often cited as having worryingly high household debt-to-GDP and debt-to-disposable-income ratios, but the assets and net worth of Canadian households have grown more quickly than their debt. Using a new financial vulnerabilities barometer, we show that the inclusion of household debt servicing considerably improves the barometer’s ability to track financial […] S2 E2 – Inequality and Monetary Policy
Michael Hainsworth sits down with the Institute’s Jeremy Kronick to talk about income inequality’s effect on inflation, and the rising non-bank financial intermediary sector that could be diluting the effectiveness of monetary policy. Water in the Wine? Monetary Policy and the Impact of Non-bank Financial Intermediaries
Study in Brief Canada was lauded for surviving the 2007-08 global financial crisis relatively unscathed. In part, this was due to the success of our financial services sector. This resilience, especially in contrast to the US banking sector, is partly explained by the smaller size of the non-bank financial intermediation (NBFI) sector in Canada – […] Jeremy Kronick on BNN – Growth in Non-bank Financial Intermediaries Could Weaken Monetary Policy
Jeremy Kronick, Associate Director of Research at the C.D. Howe Institute, joins BNN Bloomberg to discuss the rapid growth of the non-bank financial intermediation sector and its possible impact on the Bank of Canada’s monetary policy use.
Monetary Policy, Income Inequality, and Inflation – What’s the Link?
Study in Brief This paper studies the link in Canada between monetary policy, income inequality, and inflation. What are the effects of monetary policy on income inequality? and why and how does inflation play a role? Income inequality largely increased from the time the Bank of Canada began targeting inflation, through the late 1990s to […] For the Bank of Canada, what a difference a few months makes – Globe and Mail Op-Ed
The Bank of Canada announced last Wednesday that it’s continuing to hold its overnight target rate constant at 1.75 per cent. No surprise there. What is interesting, however, is a major turn of events in the economic outlook.
The global economy appears to have gone from being a drag on Canadian growth to a strength, whereas the domestic Canadian economy, once a growth driver, appears to be slowing down. The Bank of Canada still faces a balancing act – although it at least has the tools to fight domestic weakness.
The target rate in Canada has remained constant since December, 2018. Elsewhere, several major central banks lowered their policy rates in response to earlier signs of weakness in the world economy and major…
Jeremy Kronick on BNN – Income inequality has flatlined since financial crisis
Jeremy Kronick, Associate Director of Research at the C.D. Howe Institute, joins BNN Bloomberg to discuss the link between monetary policy, income inequality and inflation in Canada.
Bank of Canada Should Hold Overnight Rate at 1.75 Percent through July, Cut to 1.50 by Next Year: C.D. Howe Institute Monetary Policy Council
January 16, 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 1.75 until July 2020. 1.75 percent was the median vote of the nine members attending the meeting, and is the Council’s formal recommendation. By January of 2021, with four members calling for a cut in the target at some point, and three calling for an increase, the Council’s median recommendation was 1.50.
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…