Op-Eds

Je me méfie de l’or qui provoque des poussées de fièvre chez les spéculateurs. Mais avec les taux d’intérêt cloués au plancher, certains investisseurs sérieux considèrent maintenant le métal jaune pour remplacer partiellement les obligations dans leur portefeuille, car celles-ci ne parviennent plus à jouer pleinement leur rôle stabilisateur. En début de carrière, lorsque je faisais mes dents dans le journalisme économique, j’ai probablement trop rencontré de petits promoteurs miniers et de gold bugs, ces adorateurs du métal précieux qui, bien avant les furieux adeptes du bitcoin, voient dans l’or, les conserves et les armes à feu, des moyens de survie après l’effondrement de la civilisation et de la monnaie. Jamais on...
Last Wednesday’s interest rate announcement and Monetary Policy Report (MPR) from the Bank of Canada were the first under new governor Tiff Macklem. They provide welcome clarity on the bank’s thinking about the economic impact of the coronavirus pandemic and how monetary policy should respond Back in March, the bank cut its traditional policy instrument, the target overnight interest rate, to 25 basis points, alongside heavy interventions in financial markets to provide liquidity. The high degree of uncertainty associated with the virus and the ensuing economic lockdown led the bank to be vague in its accompanying commentary, including the key question of how it intended to hit its two per cent inflation target. The April MPR did not...
Even before the Bank of Canada’s interest rate announcement on Wednesday, the eyes of monetary policy watchers had shifted elsewhere – to the bank’s expanding balance sheet. There was little surprise when the central bank left its target for the overnight rate at 25 basis points, with the deposit rate paid to banks also remaining at 25 basis points. In fact, the target overnight rate is expected to remain where it is – a level at which the bank considers further cuts to be counterproductive – until at least well into 2021. It is clear that the overnight rate will not be the centrepiece of the bank’s monetary policy for the foreseeable future. Instead, the bank’s balance sheet and how it stickhandles it will play the starring...
The Bank of Canada’s rate announcement last week — no change — was no surprise. But the effects of its asset purchases could be. The Bank had already lowered the target rate to its effective lower bound of 0.25 per cent, so a further cut was not expected. The Bank didn’t say so but the rate may stay where it is for a while. The Bank did discuss expansions to quantitative easing (QE), however. How QE will play out for monetary policy, and especially the inflation target, is cause for concern. In its Monetary Policy Report and subsequent press conference, the Bank emphasized that its actions to date have been oriented towards supporting the smooth functioning of financial and credit markets. A focus on financial stability at a time like...
Since the COVID-19 crisis began, yield spreads for provincial 10-year bonds over equivalent federal debt have increased by about 100 basis points across all provinces. Some provinces — Newfoundland, for example — are in even worse shape. To ease funding pressures on the governments that are on the front line in health care and social assistance we need a two-pronged approach in which the Bank of Canada addresses disruption in the debt markets, and an overhauled federal fiscal backstop helps provinces still in need. The Bank of Canada is already providing liquidity to the provinces by purchasing short-term provincial debt, thus helping alleviate rollover concerns. It has also embarked on a large-scale asset purchase program — better...