Op-Eds
The budget that federal Finance Minister Chrystia Freeland will present shortly will reveal whether the government is serious about putting the national finances on to a sustainable track.
There is room for doubt. Since 2015, the government had been running deficits larger than it promised, and larger than a strong economy justified. Then it responded to the COVID-19 pandemic with debt-financed spending on an unprecedented scale.
To assuage concerns about soaring federal debt – concerns heightened by the government’s equally unprecedented failure to present a budget at all in 2020 – the Finance Minister introduced a new concept in the government’s fall economic statement that year: fiscal…
The Bank of Canada’s decision on Wednesday to start raising its target for the overnight rate of interest reflects its recognition that inflation has turned out to be higher and more persistent than it had been expecting, and that slack in the economy has now been absorbed, also faster than expected: as recently as December the bank had predicted slack would persist until the middle of this year.
Wednesday’s announcement stressed supply-side factors as the main reasons for high inflation: poor harvests and higher transportation costs, and higher energy and food-related commodity prices resulting from the invasion of Ukraine.
But there is another, often-neglected, demand-side factor that will…
À 5,1 %, l’inflation est au plus haut depuis 30 ans, bien au-delà de la cible de 2 %. Malheureusement, il n’y a rien que le Banque puisse faire pour juguler l’inflation actuelle. Les changements de taux prennent de 18 mois à deux ans pour produire leurs pleins effets.
L’annonce des premières augmentations de 25 points de base (100 points égalent 1 %) aura avant tout un but psychologique : montrer que la Banque est déterminée à mater l’inflation. Le gouverneur Tiff Macklem veut éviter qu’elle ne s’incruste dans les esprits et ne modifie durablement les comportements.
Des sondages auprès des consommateurs et des entreprises, ainsi que le marché à terme des taux d’intérêt, reflètent encore l…
Statistics Canada’s inflation report last week showed the consumer price index up 5.1 per cent year-over-year in January – more than forecasters and markets expected and more than the Bank of Canada’s latest projections implied. That’s not new: the CPI has risen more than expected most of the past year.
Expectations about how the Bank of Canada will raise its target for the overnight rate in response have also moved up – somewhat. Few forecasters and investors seem to expect an overnight rate above two per cent, at least not until well into 2023. But Canadians would be wise to prepare for an overnight rate of three per cent or more well before that.
The prospect of interest rates being higher than expected follows directly…
In a surprise move, the Bank of Canada kept its overnight rate target steady at 25 basis points Wednesday. Markets had already priced in a rate increase by the time the announcement was made, so there was ample cover to make this the first post-pandemic increase. That didn’t happen. With inflation rising at home and abroad, we believe this was a missed opportunity.
Steady increases in inflation and inflation expectations had led markets to believe the bank was set to increase its target for the overnight rate for the first time since the pandemic began. Headline inflation was up to 4.8 per cent in December, all of the bank’s core inflation measures had increased — with two of the three at or above three per cent — and its…
