Op-Eds
Published in the Financial Post on November 15, 2013
By Finn Poschmann
Incoming Federal Reserve Board Chairman Janet Yellen swept into her Senate confirmation hearing Thursday morning amid a hail of shaky financial market news.
Eurozone economists, like those in Canada and the United States, have been busy marking down their outlooks for economic growth, and with them the inflation outlook has declined, too. Fear of deflation is sweeping the bond market, pushing down long-term interest rates and raising their volatility, with big implications for central bankers.
The irony for Dr. Yellen is that during her nomination campaign, opponents sought to tar her as soft on inflation, amid a global…
Published in the Financial Post on October 24, 2013
By Finn Poschmann
Yesterday’s Bank of Canada interest rate announcement, accompanied by a preannounced downgrade to its economic forecast, triggered a wave of business headlines including variations on the word “gloom.”
Striking that the revised growth outlook was not news, and neither was the Bank’s complete inaction with respect to the overnight interest rate target – the only rate the Bank controls. What instead caught the gloomwatchers’ eyes was the Bank’s blunt refusal to reiterate past statements to the effect that short-term interest rates should be expected to go up when market conditions warranted.
And this is the topsy-turvy world to which bank…
Published in the Globe and Mail on October 18, 2013
By Lawrence Herman
We finally have a deal with Europe, called a comprehensive economic and trade agreement (CETA).
It took longer than expected and there was a real sense of drift, many thinking that the effort wasn’t going anywhere. But persistence and goodwill seems to have paid off.
The only problem is, we don’t have the text yet. All we have is the outline of an agreement in principle. A lot of what’s being put out by the Prime Minister’s Office has to be accepted on faith.
Judging from the rosy press conference given by Prime Minister Stephen Harper and EU President Jose Barroso earlier Friday, however, the hard negotiations are over and it’…
Published in the Globe & Mail on October 15, 2013
By Christopher Ragan
When it comes to central banking, we appear to be living in the era of forward guidance.
U.S. Federal Reserve Chairman Ben Bernanke has stated that his policy interest rate will remain at its ultra-low level until the U.S. unemployment rate falls below 6.5 per cent. The Bank of England’s Mark Carney has promised the same until the British unemployment rate falls below 7 per cent. In both cases, the statements are intended to send a clear signal to financial-market participants that they should expect interest rates to remain low for quite a while – and this expectation is then supposed to drive a faster economic recovery.
Yet no…
Posted in the Globe & Mail on June 4, 2013
By Christopher Ragan
Last week was Mark Carney’s last as Bank of Canada governor, and this is Stephen Poloz’s first. For their employment records, it is a Carney exit and a Poloz entrance. For their policy actions, it is exactly the reverse.
Mr. Carney got monetary policy onto the stage with aggressive actions, and his challenges were responding to an economy that was falling off the cliff. Mr. Poloz’s challenges will be getting monetary policy out of the limelight as the economic recovery eventually progresses.
A few weeks into his mandate in 2008, Mr. Carney cut the central bank’s target for the overnight interest rate from 4 per cent to 3.5 per cent –…
