Op-Eds
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…
Global growth is being deeply affected by the trade turmoil fomented by U.S. President Donald Trump and uncertainty is at the forefront, with slower growth in many places and plenty of policy risk. Here are five key issues to watch in 2020.
Expect little overall improvement in global economic prospects. It would be unrealistic to expect a material improvement in economic performance. Both the International Monetary Fund and Organization for Economic Co-operation and Development project the global economy will not strengthen by much; growth in 2020 will remain below 3.5 per cent, after 3 per cent projected for 2019. That would be the weakest period of global growth since the 2008-09 financial crisis and recession.
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The Bank of Canada announced on Wednesday that it was holding its overnight rate target constant at 1.75 per cent. Many analysts had been predicting a lowering of the rate since at least Oct. 30, when the bank also held the rate steady and the U.S. Federal Funds Rate dropped a quarter percentage point.
A recent Reuters poll reports that a majority of forecasters now expect the Canadian central bank to hold its rate constant right through the end of 2020. That will, of course, depend on the course of inflation.
In 2018, the bank was engaged in a tightening cycle and seemed to be on a course toward its long-run “neutral” rate in the range of 2.25 per cent to 3.25 per cent (compatible with an economy at full…
The Bank of Canada announced on Wednesday that it was holding its overnight rate target constant at 1.75 per cent. By coincidence, the U.S. Federal Reserve announced its rate decision on the same day, and cut its target to a range of 1.5 to 1.75 per cent.
While neither decision was a surprise, the resulting configuration of central-bank policy rates leaves the Bank of Canada in a prominent – some might say exposed – position. Canada’s policy rate is now the highest of the countries to which we usually compare ourselves. The Reserve Bank of New Zealand’s rate sits at 1 per cent, as does the Reserve Bank of Australia’s. The Bank of England has a rate of 0.75 per cent, the European Central Bank is at zero, and the Swedish Riksbank,…
Canadian monetary policy is the legal responsibility of exactly one person, the Governor of the Bank of Canada. This single decision-maker structure is unique among the central banks of advanced economies. The last review of the bank’s governance structure was conducted by a parliamentary subcommittee in 1992 (known as the Manley Committee). It is time to assess the structure governing monetary policy decisions at the Bank of Canada once again.
In contrast to the Bank of Canada, monetary policy decisions in other leading central banks are made by statutory committees. Prominent examples include the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan. In the past, many central banks had…
