Jeremy Kronick, Hashmat Khan and Matthew Soosalu – It’s not just a policy rate anymore. It’s a policy curve
Published in the Financial Post
The Bank of Canada, which has been lowering the overnight rate of interest following a nearly three-and-a-half-year battle with inflation, cut rates again yesterday. So: How tight does monetary policy remain in this easing cycle? How much further loosening needs to happen? And where will interest rates end up when all is said and done?
Answering these questions involves juggling two things at once. First, qualifying what the monetary policy stance actually is. Second, comparing it to a neutral stance — where the economy is producing at its potential and inflation is at its target — in order to determine whether it is loose or tight. Both are hard.
Start with the first element. For the…
Kronick, Ambler – Bank of Canada made the right call, despite conflicting data making it hard
Published in The Globe and Mail.
Before the release of Statistics Canada’s labour survey for November, markets were fairly evenly split between predicting a 25-basis-point cut by the Bank of Canada and a 50-basis-point cut. (A basis point is one-hundredths of a percentage point.) The increase in the unemployment rate to 6.8 per cent in November, up from 6.5 per cent in October, shifted those predictions toward 50 basis points. This is what the Bank of Canada announced Wednesday morning.
The reason that market participants were hedging their bets is that the economic data were sending mixed signals, and there is a certain elephant south of the border creating uncertainty.
We think the Bank of Canada made the right move…
Jeremy M. Kronick on BNN Bloomberg – Bank of Canada Responds to Trump Tariff Threats
Jeremy M. Kronick, Vice-President of Economic Analysis and Strategy at the C.D. Howe Institute, explains why he thinks the Bank of Canada’s December rate cut of 50 basis points was largely driven by the threat of 25 percent across-the-board tariffs from the incoming Trump administration.
C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Cut Overnight Rate to 3.50 Percent Next Week, 3.00 by Summer, 2.75 Percent in a Year
December 5, 2024 – The C.D. Howe Institute’s Monetary Policy Council (MPC) calls for the Bank of Canada to lower its target for the overnight rate, its benchmark policy interest rate, to 3.50 percent at its next announcement on December 11th. The MPC further calls for the Bank to lower the target to 3.25 percent at the following announcement in January, to 3.00 percent by June of 2025, and to 2.75 percent by December of 2025.
The MPC provides an independent assessment of the monetary stance consistent with the Bank of Canada’s 2 percent inflation target. MPC co-chair Jeremy Kronick, the Institute’s Vice-President, Economic Analysis and Strategy, chaired this meeting. MPC members make recommendations for the Bank of Canada’s…
Jeremy M. Kronick and Mark Zelmer – Assessing the Impending Grunts and Twitches from the US Elephant
From: Jeremy M. Kronick and Mark Zelmer To: Monetary policy observers Date: November 18, 2024 Re: Assessing the Impending Grunts and Twitches from the US Elephant Pierre Trudeau noted the challenges of sleeping next to the US elephant 55 years ago, and how Canada is affected by its every twitch and grunt. Now, unsurprisingly, the return of Donald Trump […]A New Monetary Policy Tool: The Real Neutral Rate Yield Curve for Canada
With the Bank of Canada engaging in both conventional and unconventional monetary policy, the difference between the Bank of Canada’s policy rate and the neutral rate when the economy is at potential and inflation is on target is no longer sufficient in determining whether – and to what degree – monetary policy is stimulative or […] Jeremy M. Kronick and Steve Ambler – Sooner Rather than Later Needed for More Rate Cuts
To: Inflation Watchers From: Jeremy M. Kronick and Steve Ambler Date: October 28, 2024 Re: Sooner Rather than Later Needed for More Rate Cuts The inflation beast is looking considerably weaker. Between the Bank of Canada’s rate announcement on September 4 and its announcement last Wednesday, Statistics Canada released two of its monthly reports on the consumer price index. They […] Jeremy Kronick and Steve Ambler – The Bank of Canada must loosen monetary policy at a faster pace
Published in the Globe and Mail.
The inflation beast is looking considerably weaker. Between the Bank of Canada’s rate announcement on Sept. 4 and its announcement on Wednesday, Statistics Canada released two of its monthly reports on the consumer price index. They showed that headline inflation fell by almost a full percentage point and is now well below target.
For this reason, markets were not surprised by the 50-basis point cut in the Bank of Canada’s overnight rate target. The cut was fully baked into market expectations, and there was even speculation about a supersized cut of 75 basis points.
As it is, the bank has more work to do with its overnight rate. With inflation falling faster than the policy rate,…
Bumps in the Road: Ever-Evolving Monetary Policy in Canada
In this paper, the authors investigate the responses of the Bank of Canada to inflation and economic conditions using a novel dataset that contains data and forecasts that were available to policymakers at the time monetary policy decisions were made. Over the inflation-targeting years from 1991, the Bank’s responses have evolved. The Bank gradually increased […] Graph of the Week: Rising Federal Debt Charges After 30-Year Decline
Public debt charges are what the government spends to pay the interest on its outstanding debt. After a 30-year decline from their 1990s highs, federal public debt charges as a share of GDP are now on the rise. With an election looming and the customary costly spending promises from all parties, it will be interesting […] Jeremy M. Kronick on BNN Bloomberg – How a 2% interest rate could impact mortgage rates
As Canada stays on track for a 2 percent inflation rate, what could this mean for mortgage rates? Jeremy M. Kronick, Vice-President, Economic Analysis and Strategy at the C.D. Howe Institute, explains.
Jeremy M. Kronick on BNN Bloomberg – Bank of Canada delivers 50 bps rate cut
Jeremy M. Kronick, Vice-President, Economic Analysis and Strategy at the C.D. Howe Institute, joins BNN Bloomberg to talk about The Bank of Canada delivering 50 bps rate cut.