Ambler, Kronick – Uncertainty Clouds the Path of Monetary Policy
From: Steve Ambler and Jeremy M. Kronick To: Bank of Canada Governing Council Date: Sept. 7, 2018 Re: Uncertainty Clouds the Path of Monetary Policy The Bank of Canada announced this week that it was leaving its overnight target rate unchanged at 1.5 percent. No surprise: the C.D. Howe Institute’s Monetary Policy Council had recommended […]Bank of Canada buys itself some breathing room on interest rates – Globe and Mail Op-Ed
Markets were not surprised by today’s Bank of Canada announcement to hike its overnight target rate by 25 basis points to 1.5 per cent. They had factored in a very high probability of an increase. And, consistent with a stated desire to improve its communications with both market participants and “the soccer dad,” it was a speech and a press conference that set the stage.
Governor Stephen Poloz’s speech on June 27 was an important factor in moving market expectations. By the end of the news conference that followed his speech, markets were confident of a hike. The theme of the speech was transparency and communications. By significantly shifting market expectations in the direction of a rate hike, the speech and news conference…
Explaining Household Debt – Canada Vs. Germany
In this edition of Graphic Intelligence, we provide a comparison between Canada and the rest of the developed world in the attempt to answer a pressing question: What causes the gap between Canada’s household debt ratios and those of its peers? Canadian household debt levels continue to attract a lot of attention, but not the good […]What the Bank of Canada is not signalling: Low inflation
Bank of Canada Governor Stephen Poloz punted the “Will He or Won’t He” rate watch to July when the Bank of Canada left its target overnight rate unchanged on Wednesday. Markets had factored in only a 17 per cent chance of a hike, so there was little surprise. Looking ahead, there is a lot to get excited about for the Canadian economy, but in the near term, a few worrying signs justify leaving rates alone. Most of these signs have appeared repeatedly in Bank of Canada communications – but for one: falling money growth. And it deserves more attention.
First, the rosy side of the ledger. Headline inflation is now above the 2-per-cent target, and the bank’s measures of core inflation are all close to 2 per cent. Canada’s…
Bank of Canada Should Hold Overnight Rate at 1.25% Next Week, Hike to 2% by Next Year
May 24, 2018 — The C.D. Howe Institute’s Monetary Policy Council (MPC) called for the Bank of Canada to hold its target for the overnight rate, its benchmark policy interest rate, at 1.25 percent at its next announcement on May 30, 2018. Looking further ahead, the Council called for a hike in the target to 1.50 percent in July, with further increases raising it to 2.00 percent by May of 2019.
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…
Bank of Canada Should Hold Overnight Rate at 1.25 Percent Next Week, Hike to 2.00 by Next Year: C.D. Howe Institute Monetary Policy Council
April 12, 2018 — The C.D. Howe Institute’s Monetary Policy Council (MPC) called for the Bank of Canada to maintain its target for the overnight rate, the very short-term interest rate it targets for monetary policy purposes, at 1.25 percent at its next announcement on April 18, 2018. Looking further ahead, the Council called for a target of 1.50 percent in May, with further increases taking the target to 2.00 percent by April of 2019.
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-…
Ambler, Kronick – Seniors May be the Answer to the Inflation Puzzle
From: Steve Ambler and Jeremy M. Kronick To: The Bank of Canada Governing Council Date: April 4, 2018 Re: Seniors May be the Answer to the Inflation Puzzle Over the past decade, inflation in many countries has been tepid, despite rock-bottom interest rates and different forms of unconventional stimulative monetary policy, including quantitative easing. For its part, […]Demographic Challenges Are Key To Solving Canada’s Inflation Riddle – Globe And Mail Op-ed
For the first time in three years, headline inflation in Canada has moved above the Bank of Canada’s 2-per-cent target. Whether or not it will continue to increase, the fact that the bank’s three core measures of inflation averaged above 2 per cent for the first time in six years certainly suggests that it will. But the question remains, why has it been so hard to hit the 2-per-cent target? In a recent C.D. Howe Institute paper, we show that demographics – often thought of as an issue for health care or pension costs – has acted as a drag on monetary policy effectiveness and, in turn, has led to lower inflation.
Much work has been done examining the issue of tepid inflation since the financial crisis. Canada has not been immune…
Faulty Transmissions: How Demographics Affect Monetary Policy in Canada
Canada’s aging population has acted as a drag on the effectiveness of monetary policy since the financial crisis, according to a new report from the C.D. Howe Institute. In “Faulty Transmissions: How Demographics Affect Monetary Policy in Canada” authors Steve Ambler and Jeremy Kronick examine the impact of demographics on the effectiveness of monetary policy through […] Ambler, Kronick – Stagflation: the Trade-Driven Elephant in the Room
From: Steve Ambler and Jeremy M. Kronick To: The Bank of Canada Governing Council Date: March 9, 2018 Re: Stagflation: the Trade-Driven Elephant in the Room As expected, the bank left the overnight rate target unchanged this week. The message was simple: growth remains broad-based, and the economic outlook will likely result in future interest rate hikes, […]Eichenbaum, Johannsen, Rebelo – Commodity Prices Not Best Predictor for the Loonie
From: Martin Eichenbaum, Benjamin K. Johannsen, and Sergio Rebelo To: Bill Morneau, Minister of Finance, and Stephen Poloz, Governor of the Bank of Canada Date: February 16, 2018 Re: Commodity Prices Not Best Predictor for the Loonie Contrary to popular belief, commodity prices are not the best predictor of the future exchange rate for the Canadian dollar, […]Understanding the Volatility of the Canadian Exchange Rate
Contrary to popular belief, commodity prices are not the best predictor of the future exchange rate for the Canadian dollar, according to new research from the C.D. Howe Institute. In “Understanding the Volatility of the Canadian Exchange Rate”, authors Martin Eichenbaum, Benjamin K. Johannsen, and Sergio Rebelo find the current real exchange rate, (ie., minus […]