Op-Eds
The Bank of Canada continued its tightening cycle on Wednesday by announcing a 50-basis-point increase that brings its target for the overnight interest rate to 1.50 per cent. That met market expectations and means the total increase since February has been 1.25 percentage points. Expect more hikes to come.
By the end of last year, the Bank of Canada had recognized that inflation had overshot projections and was going to be more persistent than previously forecast. The bank passed on an opportunity to raise rates in January, but has done so three times since, including two highly unusual hikes of 50 basis points — something not seen for over 20 years.
Does this mean monetary policy has tightened since the end of last year…
In the debate over whether the Bank of Canada should issue a central bank digital currency, it is tempting to take a black-and-white perspective. But, the truth is subtler. There exists a spectrum of CBDC design possibilities and a proper evaluation of the different options is necessary.
As it turns out, a token-based CBDC – one that mimics cash quite closely – would respect privacy, create an environment for new forms of private money to grow and wouldn’t disrupt the functioning and stability of our financial system.
To understand why this option is optimal, it is first important to distinguish between public and private money. Public money consists of the physical notes and coins in circulation – the cash in your wallet…
Comme Don Quichotte qui livrait bataille aux moulins à vent, le candidat au leadership conservateur Pierre Poilievre s’en prend à la Banque du Canada et réclame la tête de son gouverneur, Tiff Macklem, lui reprochant de faire les basses œuvres du premier ministre Justin Trudeau.
Si d’aventure M. Poilievre réussissait son coup, il précipiterait une grave crise de confiance envers la banque centrale, comme celle de l’affaire Coyne, en 1961, avec des conséquences non moins sérieuses pour la réputation du pays.
À l’époque, un conflit entre James Coyne et le premier ministre conservateur John Diefenbaker a forcé la démission du gouverneur. Son successeur, Louis Rasminsky, a cependant obtenu une modification à la loi de la…
For the first time in years, the Bank of Canada is under attack.
Before the COVID-19 pandemic, the bank kept inflation well under control – remarkably close to its 2-per-cent target – for more than 25 years. Since early 2020, however, inflation has surged. Consumer prices are up almost 7 per cent year-over-year. People are angry, and politics reflects their anger. The answer is simple: The bank must get inflation back down.
Some of the attacks are personal; promises to fire Governor Tiff Macklem have made recent headlines. That does not help. Partly because it tempts the bank’s defenders to respond in kind – to denigrate the attackers or dismiss people’s anger about inflation. Those responses would make a bad situation…
Surging inflation over the past year has Canadians on edge. The erosion of purchasing power we notice every time we visit the store or pay a bill is unsettling for everyone and frightening for many. Higher interest rates, as lenders and the Bank of Canada react to inflation, will slow borrowing and spending, and have already sparked talk of a recession. As if that’s not bad enough, experience suggests higher inflation may cause another problem: strikes and lockouts that will be harmful enough on their own but will also worsen the production and supply-chain problems that have contributed to inflation in the first place.
Work stoppages are one of the dismal consequences of inflation that has been largely out of mind since the Bank…
