C.D. Howe Institute Monetary Policy Council to Bank of Canada: Hold Overnight Rate at 5.00 Percent until Early 2024, Cut to 4.25 Percent by Next September
August 31, 2023 – The C.D. Howe Institute’s Monetary Policy Council (MPC) recommends that the Bank of Canada maintain its target for the overnight rate, its benchmark policy interest rate, at 5.00 percent on September 6th. The MPC further recommends that the Bank keep the target at 5.00 percent at least until March of 2024, then reduce it to 4.25 percent by September of 2024.
The MPC provides an independent assessment of the monetary stance consistent with the Bank of Canada’s 2 percent inflation target. William Robson, the Institute’s CEO, chairs the Council.
Council members make recommendations for the Bank of Canada’s upcoming interest-rate announcement, the subsequent announcement, and the announcements…
Glen Hodgson – US Debt Downgrade Delivers Reminder: Reserve Currencies are not Forever
From: Glen Hodgson To: Canadian Currency Watchers Date: August 25, 2023 Re: US Debt Downgrade Delivers Reminder: Reserve Currencies are not Forever Fitch Ratings’ recent downgrade of US public debt, dropping it one notch below AAA, is good reason to examine the relationship between US debt and the dollar’s future as a reserve currency. The greenback is just the latest in […] Early warning signs for Canada from U.S. debt downgrade – Financial Post
Fitch’s recent downgrade of U.S. public debt, dropping it one notch below “AAA,” is good reason to examine the relationship between U.S. debt and the dollar’s future as a reserve currency. The greenback is just the latest in a series of preferred currencies that have been used for foreign exchange reserves and to denominate other assets. But reserve currencies, unlike diamonds, aren’t necessarily forever, and that affects their issuers’ capacity to manage their public debt.
The British pound was the world’s reserve currency in the 19th and early 20th centuries, with a typical exchange rate a century ago of around US$5, vs. US$1.25 per pound today. The pound faded after 1945 because of Britain’s massive war debts, the…
The productivity problem in Canada’s economy is really a marketing and sales problem – Globe and Mail
Our national “productivity gap” has spurred analyses, reports and media articles for decades. While public debate in Canada has focused on productivity improvement for more than 50 years, we have made limited progress. Fresh thinking is required.
While innovation through research and development (R&D) is certainly important to productivity growth – and has preoccupied the federal government over the past half-century – there is also a connection between firm size and productivity. The larger the firm, the more productive it typically is. Logically, then – and the research supports this proposition – one way to increase our productivity is to increase the size of our companies from small and medium to large. Something we have…
Nitani and Nusrat – Solving Canada’s SME Financing Conundrum
To: Small business watchers From: Miwako Nitani and Aurin Shaila Nusrat Date: August 3, 2023 Re: Solving Canada’s SME Financing Conundrum Canada’s small and medium-sized enterprises (SMEs) play an out-sized role in generating jobs and promoting economic prosperity. Even so, Canadian growth-oriented SMEs lag behind those of other advanced countries and face financing hurdles, in raising debt and attracting […] The Missing Ingredient: Solving Canada’s Shortcomings in Growing Large Firms and Increasing Productivity
Solving Canada’s perennial productivity problem will partially be addressed by creating companies that scale from start-up to world-class status. Canada has been challenged at scaling companies and, in fact, has the lowest number of manufacturing companies with over 250 employees per one million in population in the 35 countries with employment data available from the […] Lawrence Herman – Private Rule-Making Elbows into Global Governance
From: Lawrence Herman To: International Standards Observers Date: July 28, 2023 Re: Private Rule-Making Elbows into Global Governance Components of the global order, standards in particular, are increasingly generated through private-sector action – outside of governments – and often referred to as “private global rulemaking.” As I outlined in an earlier Intelligence Memo, these rules and standards can achieve […] Scaling Up Is Hard To Do: Financing Canadian Small Firms
What’s holding back small business growth in Canada? Canada’s small and medium-sized enterprises are vital to job creation and economic prosperity but struggle with access to financing compared to peers in other advanced economies. Bank of Canada’s latest interest rate hike may be one too many – Globe and Mail
On Wednesday, the Bank of Canada increased its policy rate to 5 per cent, a level not seen since March, 2001. Citing continuing tightness in labour markets and still-firm consumer spending, the bank reasoned there is still excess demand in Canada’s economy, and that Wednesday’s rate hike was necessary to continue to bring activity in line with productive potential. But if that adjustment is already happening, this hike may turn out to be one too many.
Among the many challenges a central bank faces in a fight against high inflation is the mixed signals it gets as it hikes rates to get inflation down. In Canada, the year-over-year headline inflation rate fell to 3.4 per cent in May. However, most of that was driven by a fall in…
I’m not convinced the earlier rate hikes have worked their way through: Economist Jeremy Kronick
Jeremy Kronick, director of monetary and financial services research at the C.D. Howe Institute, joins BNN Bloomberg to preview the Bank of Canada’s next rate decision due on Wednesday, and explains why he believes there is no need for further interest rate hikes at this time. Devlin, Forssell – Federal Mortgage-Bond Consolidation Should be a Non-Starter
To: Finance Minister Chrystia Freeland From: Ed Devlin and Anders Forssell Date: June 26, 2023 Re: Federal Mortgage-Bond Consolidation Should be a Non-Starter The federal government intends to engage in market consultations on the potential consolidation of Canada Mortgage Bonds (CMB) within the Government of Canada borrowing program, it said in its last budget. A decision is expected in […] Consumers bring forward spending if they expect continued inflation: C.D. Howe’s Jeremy Kronick
Jeremy Kronick, director of monetary and financial services research at the C.D. Howe Institute, tells BNN Bloomberg that elevated inflation expectations could be a reason for the jump in household spending in today’s Q1 GDP data. He says lower business spending makes him less optimistic about improvement in productivity. On the BoC’s rate meeting next month, he says the central bank may choose to see if future data continues to support tightening before hiking rates again.