Over the years, federal budget legislation has acquired the feel of U.S. omnibus bills (the Farm Bill is probably the quintessential example). To some extent, this is to be expected. Ever since the “disastrous” Trudeau era, the imperial Department of Finance has not-so-quietly re-asserted its domain over the federal bureaucracy. One manifestation of Finance’s power has been the increasing tendency […]
Read moreThe good news is that the Bank of Canada today matched the maximum market expectation of them, a half point cut in the target for the overnight rate. They even suggested that further interest rate cuts are in store. “Further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and […]
Read moreToday’s Consumer Price Index numbers indicate that, while gasoline prices and mortgage-interest costs edged-up overall inflation in November, core inflation declined again. When it fell last month, some commentators responded that “one month does not make a trend.” However, as Statistics Canada itself noted, a fairly clear trend has emerged: However, the Bank of Canada’s core index, used to monitor […]
Read moreJim Stanford and I appeared before the Industry Committee yesterday to speak to the impacts of the high dollar, particularly on manufacturing. Chaired by James Rajotte, the Committee has done some good work on manufacturing and has worked in a relatively constructive and not totally partisan way to develop some useful reports and recommendations. Their report last year did urge […]
Read moreNouriel Roubini takes a dig at the Bank of Canada: [Yesterday] the Bank of Canada started to get it by, unexpectedly, cutting its policy rate by 25bps; but 25bps is puny given the liquidity crunch in global markets that has also spread to the Canadian markets. 50bps or more was the minimum necessary to deal with a Loonie that is […]
Read moreSeeing more downside to the Canadian economy compared to worries about inflation, the Bank of Canada lowered overnight interest rates today by a quarter-point. The Bank has apparently been reading the PEF blog, as we have been calling for a rate cut for more than two months. (This is also personally reassuring as I decided to go with the variable […]
Read moreFrom Today’s (December 3) Toronto Star Canada’s economy is on the cusp of some very tough times, and it will require enlightened and timely central bank action to ensure that our economy avoids a recession next year. The crux of Canada’s economic problems is related to the slowing U.S. economy which threatens to fall into a recession, the huge increase […]
Read moreI note that 4 of the 9 economists on the CD Howe’s rather grandiosly titled Monetary Policy Council are supporting a rate cut by the real folks at the Bank of Canada next week, and two of them (including Ed Carmichael from JP Morgan Chase) even call for a half point cut.  http://www.cdhowe.org/display.cfm?page=monetaryReleases The bare majority calling for an unchanged […]
Read moreToday’s Consumer Price Index (CPI) release reveals that inflation has dipped to 2.4% and core inflation has fallen to 1.8%, its lowest level since June 2006. These figures undermine the argument that interest rates should be maintained to slow inflation. As the National Post reports, “A weaker-than-expected rise in the inflation rate for October could give the Bank of Canada […]
Read moreThe unprecedented surge in the Canadian dollar from 85 cents US in early 2007 to as high as $1.10 in early November is deeply disturbing in terms of its implications for the health of the economy and the job market. Very rapid exchange rate appreciation is bad news for most enterprises exporting abroad, or competing with US and Asian exporters […]
Read moreIt’s not often that you can detect even a nuance of difference between Finance and the Bank on key economic issues, but do I detect a hint of greater alarm on the part of the former over the recent super-rapid appreciation of the Canadian Dollar? In yesterday’s Economic Statement (Chapter 1, p.19) “If the Canadian dollar were to remain close […]
Read moreA recent debate on strategic voting between Erin Weir and Matthew Bergbusch prompts me to wonder the extent to which liberals are more progressive than conservatives in the federal political arena. I think we can mostly agree that on social issues, such as gay or women’s rights, the liberals do stand on the left of the conservatives. And this is […]
Read moreGreed, gouging and bad citizenship KEN GEORGETTI Special to Globe and Mail Update October 17, 2007 at 11:34 PM EDT What have Canadians gained from our loonie’s parity with the U.S. greenback? A more valuable currency should make the things we buy from other countries cheaper. But, over the past five years, as the value of the Canadian dollar has […]
Read moreWith core inflation running at 2.2%, the Bank of Canada left interest rates unchanged today – despite the soaring Canadian dollar and its impacts on the struggling manufacturing sector, despite a slowing US economy, and despite tight credit market conditions. I think the Bank should have matched the recent half percentage point US rate cut to take the froth out […]
Read moreIn the online edition of today’s Toronto Star, Arthur Donner and Doug Peters have joined the labour movement and the National Bank in calling for the Bank of Canada to cut interest rates.
Read moreThe Canadian Labour Congress sent the following letter to the Bank of Canada today. September 20, 2007 David A. Dodge Governor Bank of Canada 234 Wellington Street Ottawa, Ontario K1A 0G9 Dear Governor Dodge: I write to urge you to reduce interest rates by 0.5% on October 16th to match the recent US rate cut. My letter of June 27th […]
Read moreUpon returning from Montreal, where I volunteered for the NDP on by-election night, I discovered that the US Federal Reserve cut interest rates by a whopping half point. I do not have a fully-formed analysis of either Mulcair’s victory or the rate reduction, but would like to kick-off some discussion on this blog. Mulcair’s win strikes me as an important […]
Read moreHow do we explain the behaviour of the Japanese yen — which has not only avoided the major appreciation (against the U.S. dollar) that other major currencies have experienced (most acutely including Canada’s), but is actually down by over 15% since 2005 (despite Wall Street’s financial wobbles)? Japan has the world’s third largest trade surplus, so if exchange rates reflect […]
Read moreI have just returned from the annual conference of the Canadian Association for Business Economics in Kingston. On Monday evening, we heard from Pierre Duguay, a Deputy Governor of the Bank of Canada. Without specifically mentioning Jim’s Globe column, he suggested that some people mistook the Bank’s intervention in financial markets as a deviation from monetary policy’s exclusive focus on […]
Read moreNice to see the Bank of Canada swinging into action the last couple of weeks, pumping many billions of dollars of liquidity into financial markets to ease the sub-prime-inspired credit crunch, and making very hard-nosed statements about its intention to “defend†its desired interest rate regardless of where the markets want to go. Now that’s my kind of central bank. […]
Read moreWhereas Jim Stanford’s latest Globe column argues that central banks should be as willing to intervene on behalf of manufacturing as on behalf of hedge funds, Andrew Coyne’s column in today’s National Post argues that central banks should intervene as little as possible and not bail anyone out. At least Coyne’s position is consistent and avoids the double standard identified […]
Read moreMy take on today’s release follows: Job Numbers As Statistics Canada noted, “Employment was little changed in July.” Employment growth in Alberta and Ontario was largely offset by job losses in the other eight provinces. As a result, the Canadian labour market created 11,300 new positions in July, far fewer than in previous months. Some commentators argue that the Bank of […]
Read moreFurther to Erin’s post on the odd fluctuations in the monthly inflation rate, a better approach is to look at year-to-date averages in order to smooth out these monthly fluctuations. For the first six months of 2007, the average CPI was 111.05, and for the first six months of 2006, 108.87. This works out to an first-half of 2007 inflation […]
Read moreA month ago, I noted that if the Core Consumer Price Index remained unchanged from May to June 2007, the annual core-inflation rate would jump to 2.5% because this Index had fallen from May to June 2006. Today’s release from Statistics Canada reveals that this is exactly what happened. Since the monthly Index remained constant at 109.9, the annual rate […]
Read moreIt is worth filing under the “you heard it here first” heading that both the Globe and Mail and the Toronto Star have taken editorial positions similar to those proffered by Relentlessly Progressive Economics. That is, the Bank of Canada is raising interest rates because of what is happening in Alberta, and in doing so threatens to exacerbate difficulties in […]
Read moreMy assessment of today’s Labour Force Survey follows: Manufacturing Crisis Deepens • The loss of a further 31,000 manufacturing jobs in June pushed total manufacturing employment losses to 95,000 positions since the beginning of February 2007. Since employment in Canadian manufacturing peaked in November 2002, this sector has lost 308,000 jobs. Construction and Resource Employment Falls • In June, CIBC […]
Read moreThe Bank of Canada goes to great pains to tell us that they have only one goal – namely to keep inflation at the mid point of the 1-3% target range – and have no view on the appropriate exchange rate of the Canadian dollar except insofar as it relates to this one goal. This stance is more than […]
Read moreRelatively high inflation in Alberta seems to be the only justification for raising Canadian interest rates. In this context, it is tremendously significant that the Government of Alberta itself opposes increasing rates. Of course, higher interest rates imply a higher Canadian dollar. Alberta sells oil and gas, the prices of which are denominated in US dollars. As the Canadian dollar […]
Read moreThe “core inflation” rate’s jump to 2.5% for April 2007 (released in May 2007) was great cause for concern among many economic pundits and seemed to prompt the Bank of Canada’s announcement that it intends to raise interest rates. Of course, 2.5% must be regarded as quite moderate inflation and falls well within the Bank’s own 1%-3% range. However, this […]
Read moreIn the Globe and Mail it is reported: A flurry of increases in the past month has sent Canadian mortgage rates to their highest level in more than five years, and consumers shouldn’t expect a return to the low interest rates they enjoyed in the first half of the decade. The story quotes Benjamin Tal of CIBC World Markets, commenting […]
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