Good luck to Fed Chairman Janet Yellen: Financial Post Op-Ed

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…

Carney era dead at Bank of Canada: Financial Post Op-Ed

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…

We Have A Deal With Europe. Let’s Not Blow It: Globe And Mail Op-ed

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’…

Canada’s central banker needs to explain his hands-off approach: Globe & Mail Op-Ed

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…

The Seductive Myth of Canada’s “Overvalued” Dollar

Carney’s bold entrance, Poloz’s measured exit: Globe and Mail Op-Ed

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 –…

Interest Rates: What Will the New Normal Look Like: Financial Post Op-Ed

Published in the Financial Post on May 29, 2013

By Paul Beaudry and Philippe Bergevin

In its last rate announcement with Mark Carney at the helm, the Bank of Canada unsurprisingly left short-term interest rates at 1%. Good news for borrowers; not so good for savers.

As has become its habit, the Bank also reminded us that rates won’t stay low for ever; they’ll stay where they are for “a period of time.” Inevitably, interest rates will go up, and eventually return to more normal levels. The question is: What will the new normal level look like?

Historically, the normal – or “neutral” in economic jargon – rate has been about 4%, but it varies over time. Over the coming decade or so, our assessment is that…

The New “Normal” for Interest Rates in Canada: The Implications of Long-Term Shifts in Global Saving and Investment

The Dangers of an Extended Period of Low Interest Rates: Why the Bank of Canada Should Start Raising Them Now

The New Governor May Be A Surprise, But The Bank’s Role Is Firm: Globe And Mail Op-ed

Published in the Globe and Mail on May 3, 2013

By William Robson

The announcement that Stephen Poloz will succeed Mark Carney as Governor of the Bank of Canada was a surprise – senior deputy governor Tiff Macklem was a strong internal candidate for the position – but no shock.

Mr. Poloz was a leading outside candidate from the moment the search for a successor to Mr. Carney began. Not only had he spent 14 years at the Bank of Canada, rising to head its research department, but his subsequent experience – most notably at Export Development Canada, which he has led since 2011 – developed his contacts in the business world and his management capacity. He is personable and an able communicator – key assets in any job,…

Monetary Apocalypse: Financial Post Op-Ed

Published in the Financial Post on February 15, 2013

By Finn Poschmann

As G20 finance ministers and central bankers converge in Moscow Friday, intending either to abate or stoke a burgeoning currency war, they will confront fallout over recent actions by Japan’s new and rather odd government, led by Shinzo Abe.

After decades of low growth, low or negative inflation and pummelled asset values, Prime Minister Abe has quite reasonably been talking up inflation and talking down the yen, and firmly nudging the Bank of Japan to encourage as much. And the yen has quite reasonably responded by taking a long dive since Mr. Abe’s December election. Trouble with that is Japan is in the G20 and the G7, where competitive…

Thank Carney And Horseshoes For Canada’s Stellar Performance: Globe And Mail Op-ed

Published in the Globe and Mail on February 13, 2013

by Finn Poschmann

Last Friday’s non-bubbly housing start numbers and weak employment data should not distract Canadians from two key points. First, after a short, sharp economic shock, Canada’s economy began its recovery in late spring 2009 and has hardly paused since. Second, in comparison with the U.S., the EU, and especially the U.K, Canada’s performance has been stellar.

Canada’s performance certainly bought attention in the U.K., where some of the credit has rightly landed in the lap of Bank of Canada Governor Mark Carney.

Last week, Mr. Carney landed in London for a public pre-entry interview by the House of Commons treasury committee, which wanted to…