C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Cut Overnight Rate to 3.75 Percent Next Week, 3.00 by Spring, 2.50 Percent in a Year
October 17, 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 3.75 percent at its next announcement on October 23rd. The MPC further calls for the Bank to lower the target to 3.50 percent at the following announcement in December, to 3.00 percent by April of 2025, and to 2.50 percent by October 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 William Robson, the Institute’s President and CEO, chaired this meeting. MPC members make recommendations for the Bank of Canada’s target for the overnight rate…
Kronick, Ambler – Why the Bank Needs to Think Bigger For its Next Rate Cut
From: Jeremy M. Kronick and Steve Ambler To: Canadian economic observers Date: October 2, 2024 Re: Why the Bank Needs to Think Bigger For its Next Rate Cut It is rare for the Bank of Canada to change its policy interest rate by more than 25 basis points, either up or down. Big changes have been reserved for crises, […] Ambler, Kronick – If inflation falls again, BoC should cut interest rates 50 points
Published in the Financial Post.
It is rare for the Bank of Canada to change its policy interest rate by more than 25 basis points, either up or down. Big changes have been reserved for crises, like the beginning of the pandemic, when the Bank made three 50-basis-point cuts in a single month, or when inflation is running out of control, as it was in late 2022 when the bank raised its rate by 50 basis points. Last week’s news that inflation has returned to the bank’s two percent target does not signal a crisis but in our view it does mean a larger-than-normal cut is called for. Without an aggressive cut, the economy could tip into a needless recession.
It’s been a long road since inflation first rose above its official two…
Graph of the Week: Core Inflation Components Fall Below 3% – A Sign of Broad Softening
Graph of the Week is a new series from the C.D. Howe Institute’s Graphic Intelligence that presents valuable and easily digestible data. Each Monday we unveil one new captivating chart or graph with interesting insights, explaining it in two-to-three sentences. Dive into the data with us.Headline inflation came in right at the 2 percent target […] Jeremy M. Kronick on BNN Bloomberg – Canadian inflation slows to 2 percent annual rate in August
Inflation in Canada has dropped to its slowest annual rate since February 2021, marking the first time in over three years that it has reached the Bank of Canada’s target level. With inflation slowing and the economy showing signs of weakness, what actions might the Bank of Canada take next? Jeremy M. Kronick, Associate Vice President and Director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute, joined BNN Bloomberg’s Morning Markets host Jon Erlichman to share his insights on Canada’s inflation rate slowing to 2 percent in August.
Robson, Laurin – Real Return Bonds, whose value rises with inflation, deserve another chance
Published in The Globe and Mail.
Two years ago, the federal government made a surprising decision to cease issuing Real Return Bonds (RRBs) – the government of Canada bonds that are indexed to the Consumer Price Index. It justified cancelling new issues of RRBs with the argument that there was not enough demand for them. Yet RRBs are a valuable tool for investors to protect themselves from inflation and for the government to contain the cost of its debt. This is why it’s time to reverse this decision and bring RRBs back to the market even bigger and better than before.
RRBs are unique. Their principal increases with the price level, meaning that whether inflation is 2 per cent – in line with the current commitment of the…
Kronick, Ambler – Don’t Fear Fed Inaction; Keep Those Rate Cuts Coming
To: Interest rate watchersFrom: Jeremy M. Kronick and Steve AmblerDate: September 10, 2024Re: Don’t Fear Fed Inaction; Keep Those Rate Cuts Coming With CPI inflation slowing to 2.5 percent in July, last week’s Bank of Canada rate cut surprised no one.Given the dovish tone of the Bank’s announcement, it would be reasonable to expect at […] Graph of the Week: Overnight Rate and 12-Month Change in House Prices, 2018-2024 (July)
Graph of the Week is a new series from the C.D. Howe Institute’s Graphic Intelligence that presents valuable and easily digestible data. Each Monday we unveil one new captivating chart or graph with interesting insights, explaining it in two-to-three sentences. Dive into the data with us. In the ensuing months after the Bank of Canada […] Kronick, Ambler – Bank of Canada should keep cutting interest rates, whatever the U.S. Fed does
Published in The Globe and Mail.
With CPI inflation slowing to 2.5 per cent in July, the rate cut announced by the Bank of Canada on Wednesday surprised no one.
Given the dovish tone of the bank’s announcement, it would be reasonable to expect at least one and possibly two more 25-basis point cuts before the end of this year (a basis point is one-hundredth of a percentage point).
This cut widened the gap between the Bank of Canada’s overnight rate target and the top of the U.S. Federal Reserve’s band for its equivalent, the federal funds rate, from 50 basis points at the end of May to 1.25 per cent.
Should this gap worry the Bank of Canada – perhaps lead it not to cut the overnight rate again even if it…
C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Cut Overnight Rate to 4.25 Percent Next Week and to 3.00 Percent in a Year
August 29, 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 4.25 percent at its next announcement on September 4th. The MPC further calls for the Bank to lower the target to 4.00 percent at the following announcement in October and to 3.00 percent by September 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, William Robson, the Institute’…
Cancel the RRB Cancellation
Two years ago, the federal government ceased issuing Real Return Bonds, which are a valuable tool for Canadian savers to protect themselves from inflation. The government cited weak demand for RRBs as justifying the cancellation, without acknowledging that its approach to RRBs itself promoted a thin market that lessened the attractiveness of RRBs to potential […] Ripple Effects: The Impact of an Empty-Homes Tax on the Housing Market
The Canadian housing market is experiencing an unprecedented crisis. One solution being explored is the adoption of demand-side measures like Vancouver’s 2017 empty-homes tax. This E-Brief evaluates the tax’s impact on housing affordability and availability, helping policymakers balance efficient property use with ensuring a steady supply of new homes. We use the difference-in-difference (DID) method […]