This morning, Statistics Canada reported that the implementation of Harmonized Sales Tax in Ontario and British Columbia helped drive the national inflation rate from 1.0% in June to 1.8% in July. By comparison, the Bank of Canada’s core inflation rate (which excludes tax changes and volatile items) edged down from 1.7% to 1.6%. However, annual inflation rates are not the […]
Read moreNine days ago, I posted about private non-financial corporations accumulating cash rather than investing in Canada. A week later, the Bank of Canada’s Monetary Policy Report (MPR) noted “the relatively high level of liquidity held by the non-financial corporate sector and weak investment†(page 19). By my count, the document expresses concern eight separate times about anemic business investment. It acknowledges […]
Read moreBetween May and June, consumer prices decreased in both absolute and seasonally-adjusted terms. As a result, the annual inflation rate fell to 1.0%, about half what it had been at the start of this year. One province, Manitoba, actually slipped into deflation. The Bank of Canada’s core rate edged down to 1.7%. Monetary Policy Inflation’s continuing decline begs the question […]
Read moreThere seems to be a consensus that the Bank of Canada will raise its target interest rate tomorrow. I thought that last month’s rate hike was premature, so I see no reason for another hike this month. The argument for higher interest rates is that they are needed to ward off future inflation (even though inflation is currently below the […]
Read moreToday’s Toronto Star features an op-ed by John Cartwright, President of the Toronto and York Region Labour Council. (I once had the chance to hear John speak at a press conference in Toronto and found him to be an oustanding public speaker. But I digress…) In the piece, he argues that “we” (I think he means both the Harper government and the […]
Read moreThrough a series of speeches and Financial Post op-eds, former cabinet minister Maxime Bernier has been setting out an uncompromising right-wing agenda. He had Andrew Coyne applauding his proposal to freeze public spending. He had Stephen Gordon tweeting in support of his proposal to eliminate corporate taxes. But his latest proposal has already been rebuked by Gordon and is unlikely to […]
Read moreFurther to my recent post on the last Monetary Policy Report http://www.progressive-economics.ca/2010/05/11/the-bank-of-canada-and-the-recovery/ I cannot claim to be surprised that the the Bank of Canada has decided to begin to raise interest rates, albeit by an initial quarter point from extraordinarily low levels. They are also returning to normal overnight money market operations which will tighten credit to a degree. I […]
Read moreThis morning, the Bank of Canada raised its interest-rate target from 0.25% to 0.5%. Yesterday’s robust GDP numbers had the overwhelming majority of economic pundits arguing that it should and would do so. But just one week ago, when the stock market was plummeting due to the Euro crisis, most commentators and headlines suggested that the Bank of Canada might […]
Read moreThis morning, Statistics Canada reported that the annual inflation rate rose to 1.8% in April. Inflation and Wages While inflation remains low, it is eating up almost all of the modest wage increases that workers have eked out over the past year. The Labour Force Survey indicates that the average hourly wage rose by 2.0% between April 2009 and April […]
Read moreThe Bank of Canada’s most recent Monetary Policy Report  http://www.bankofcanada.ca/en/mpr/pdf/2010/mpr220410.pdf forecasts quite a strong short-term recovery. However, it is projected that growth will begin to taper off from the middle of this year and slow to just a 2% annual growth rate by mid 2011. The recovery is being driven by government stimulus spending – which remains significant through 2010 […]
Read moreMark Carney saw a bogeyman on Tuesday morning. He was spooked into removing his conditional commitment to hold interest rates, which would otherwise have expired at the end of June. By signalling that it might raise interest rates ahead of schedule, the central bank drove the Canadian dollar from 98 US cents on Monday to 100 US cents on Tuesday. […]
Read moreBelatedly, two days after the fact, the Globe picked up on Bank of Canada governor Carney’s discussion of the Bank’s model of the world economy (I blogged about that speech here) at a speech to the Ottawa Economics Association (OEA) last Wednesday. The Globe spun the story in an unusual way by suggesting that the Bank and its analysis (using […]
Read moreYesterday, the Fraser Institute published a new report, which argues that the government stimulus did not drive Canadian economic growth in the last two quarters of 2009 and suggests that government spending on infrastructure was useless for the economy. The report earned the scorn of Finance Minister Flaherty, who was quoted in the Vancouver Sun calling the report “poorly done […]
Read moreThe main question about this morning’s Consumer Price Index is whether it will propel the Canadian dollar to parity with the American dollar. Higher inflation would increase the chances of our central bank raising interest rates sooner rather than later. Higher interest rates would make the loonie a more attractive holding for international financiers. In fact, today’s figures show the […]
Read moreMy post on this past Monday’s Gross Domestic Product (GDP) release emphasized the disconnect between profits and investment in the corporate sector. As Andrew commented on that post, the public sector’s contribution to the recovery is also noteworthy. That point seems especially relevant in the wake of a federal budget devoted to continuing previously announced stimulus. The right-wing critique from […]
Read moreWho would have thunk it. Seems like there is a pretty radical rethink of monetary policy verities going on at the IMF of all places. The exchange rate rethink seems especially relevant to Canadian monetary policy and they will be aghast at the Bank of Canada on the case for higher inflation targets. From today’s FT http://www.ft.com/cms/s/0/f9f4067e-1758-11df-87f6-00144feab49a.html IMF floats plan […]
Read moreThe obvious headline from today’s Statistics Canada release is inflation rising to 1.3% in December, its highest level in almost a year. However, the Consumer Price Index actually decreased between November and December. The overall price level was down 0.3% in absolute terms and 0.1% on a seasonally-adjusted basis. The annual inflation rate rose only due to a lower base […]
Read moreThe national inflation rate jumped to 1.0% in November from 0.1% in October. As Statistics Canada notes, this apparently large increase is “due primarily to gasoline prices.” Specifically, last month’s gasoline prices are being compared to the depressed gasoline prices of November 2008. Given the changed base of comparison, it is not surprising that the headline inflation rate has returned […]
Read moreAs the communique from the Pittsburgh G20 put it, “it worked.” Unprecedented macro-economic stimulus in the form of ultra low interest rates and large government deficits pulled the global economy back from the abyss. Canada has now joined most countries in exiting the recession, at least very tentatively. But what is next? The official line from the Canadian government, the […]
Read moreLast Saturday the Globe and Mail (November 28, page B1) ran a multi-page spread on national government debt. It was a mish mash of large titles, large numbers and sensational assertions: “A World Awash in Debt”; “Climbing out of this hole won’t be easy”; “the numbers are staggering”, “debt would climb to about 300 percent of GDP… tweak that and […]
Read moreWhat can be done to halt the damage to jobs and our economy being caused by the excessive appreciation of the Canadian dollar against the US dollar? The Bank of Canada have noted the problem, but appear to think there is no solution. Erin has argued here that the Bank can always sell Canadian dollars, and that it is far […]
Read moreThe Canadian dollar is again becoming more overvalued. After dipping as low as 92 US cents at the end of October, it rocketed up to 96 US cents so far today. Meanwhile, the OECD has released another month of purchasing-power data. Although the loonie’s average price on foreign-exchange markets edged up between August and September, its relative buying power in […]
Read moreLast week, I posted about how several chartered-bank economists have been denying the Bank of Canada’s capacity to lower the Canadian dollar. While I think that the chartered banks generally prefer a high loonie, it is important to note that not all of their economists are signing from the same songbook. CIBC’s Avery Shenfeld advocates intervention by the Bank of […]
Read moreDebate is heating up about whether the Bank of Canada should or will intervene in currency markets to lower the Canadian dollar (as I have been proposing for three months). Today’s two-cent drop in the exchange rate may indicate that currency traders are anticipating this possibility. Over at Worthwhile Canadian Initiative, Stephen Gordon objected to recent comments from RBC’s Patricia Croft on […]
Read moreThe Bank of Canada seems to have at least left the door open to taking unorthodox measures to take some of the steam out of soaring loonie. Today’s interest rate announcement – http://www.bankofcanada.ca/en/fixed-dates/2009/rate_201009.html – to be followed by a full Monetary Policy Report on Thursday – expresses concern that the strong Canadian dollar will hold back recovery… “The current strength […]
Read moreThis morning’s consumer price figures for August are reminiscent of July. The annual Consumer Price Index decline was 0.8% (compared to 0.9% last month.) With the exception of July, August was the sharpest drop in consumer prices since 1953. In both July and August, eight of ten provinces posted negative inflation rates. The only province with positive inflation in both […]
Read moreComments in the Bank of Canada’s last two interest-rate announcements and by its Governor have fuelled speculation that it might intervene in currency markets to moderate the overvalued Canadian dollar. Of course, these remarks may be garnering undue and unintended attention. With the Bank conditionally committed to no interest-rate changes for a year, comments on the dollar have been the […]
Read moreI normally hesitate to make short term economic prognostications and the Bank of Canada could indeed be right that growth might tip over the cusp from negative to positive in the third quarter as the first sign of a “nascent recovery” from the Great Recession. As many have noted, including Jim on the National on Thursday night, a mildly positive […]
Read moreMedia coverage of the Bank of Canada’s much anticipated Monetary Policy Report inevitably focuses on the prospect of “unconventional” measures, such as quantitative and credit easing. But the verbs in today’s headlines – “may use” , “ready to” , “lays out” , “sets stage” – reflect how little was actually announced. The Bank provided three pages explaining quantitative and credit […]
Read moreFor several months, it has been clear that there is no near-term threat of inflation and that the economy needs all the stimulus it can get. In this context, the Bank of Canada should cut interest rates as far as possible. Since January, I have been calling for a target interest rate of zero percent. We should applaud this morning’s […]
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