Tag Archives: Bank of Canada

Roundup: Unpacking the rate decision

Posted on by

The Bank of Canada released their interest rate decision yesterday morning, and held firm…mostly. More significantly, they removed their extraordinary forward guidance, meaning that they have sent the warning that rates are going to rise. Why they didn’t raise them this time is because they had that guidance in place, which essentially said that they weren’t going to raise rates until later in 2022 as a way to help the economy recover from the pandemic—but it has largely recovered, albeit unevenly. With omicron still having an effect, there is still an abundance of caution being exercised—not to mention the fact that raising interest rates won’t actually have an effect on what is currently driving inflation, so it has the potential to do more harm than good right now.

The Monetary Policy Report was also released yesterday, which highlighted how transportation bottlenecks, labour shortages and the difficulty in sourcing key inputs are having an impact on the Canadian economy. More to the point, there has been good economic momentum heading into 2022, and the “slack” in the economy has been absorbed, meaning that the extraordinary measures that were brought in to stimulate the economy at the start of the pandemic can more readily be wound down now, which is another key indicator of why rates are going to start rising again. They also see inflation winding down later over this year, providing that supply bottlenecks and cost pressures don’t carry on for longer than anticipated.

Meanwhile, here’s Kevin Carmichael with his read of the rate decision, the MPR, and what signals the Bank of Canada is sending.

Continue reading →

Roundup: Those December inflation numbers

Posted on by

Yesterday was Consumer Price Index day at StatsCan, which means a new round of inflation data, and a new round of ridiculous shitposts from Erin O’Toole and Pierre Poilievre. In an effort to provide some perspective as to what is driving prices this month, let’s delve into the report, shall we?

Key drivers are:

  • Food prices have been rising because of poor weather conditions in food-growing regions, which has impacted prices for things like fresh fruit, and supply chain disruptions impact those imports. Additionally, we had droughts in Canada this summer, and crop yields were down in the area of 35 percent, which is making it more expensive.
  • Durable goods, primarily things like household appliances and vehicles, all of which are impacted by those supply chain disruptions, especially with the ongoing global shortage of semiconductor chips.
  • Construction costs are higher because of higher building materials (demand outstrips supply), and home and mortgage insurance prices have been rising as a result of severe weather-related claims.
  • Gasoline prices have moderated, which is again, a global supply and demand issue.
  • Oh, hey—stronger demand for air travel is increasing the price of fares.

So yeah, I’m not seeing a lot in here that is either Justin Trudeau’s fault, or something that he, or any other future federal government could do anything about. I mean, other than wage and price controls (which didn’t actually work), so if we want to bring back “Zap, you’re frozen!” that remains an option. As well, prices have started to moderate. Month-over-month inflation was actually down 0.1 percent, which could be the signal that things are starting to turn a corner.

https://twitter.com/LindsayTedds/status/1483990594770800643

Continue reading →

Roundup: No, an electoral agreement won’t work

Posted on by

Because Doug Ford and his merry band of incompetent murderclowns have decided to make Ontario miserable again with eleventh-hour changes and nonsensical measures (sorry, guys, but I am going to be insufferably bitter about the gyms being closed down again), there is once again talk about how the provincial Liberals and the NDP need to come to some kind of agreement in order to get Ford out. Which is insane.

https://twitter.com/AaronWherry/status/1478063212281085953

https://twitter.com/AaronWherry/status/1478064242985246720

The Liberals and NDP, provincially and federally, are not the same party, don’t have the same positions, and even if they both err on the side of progressivity, and frankly, it’s a major betrayal of local democracy if you’re telling your riding associations not to run candidates because of some cockamamie plan that involves dubious polls or results from an election three-and-a-half years ago with other factors in play which are irrelevant to the current context. Sorry, but no. The opposition parties need to come up with a coherent message and plan to sell to the people of Ontario, and to be steadfast in holding Ford to account rather than letting him get away with his folksy aw-shucks routine. It means the parties need to organise their ground game. It means a proper electoral contest, not a theoretical exercise based on bullshit reasoning.

Continue reading →

Roundup: The inflation stats and what’s behind them

Posted on by

Rounding out the big economic week was the Consumer Price Index report yesterday (made all the more difficult because Statistics Canada’s website is largely offline as they seal the cyber-vulnerability identified on Friday). The top line figure is that inflation remains at 4.7 percent for a second month in a row, meaning that it hasn’t accelerated into the much higher territory that places like the US are sitting at, and several of the price indicators were flat, which could mean that some prices are starting to stabilise. But it’s still early days, though when you drill down into the numbers, there are really three things that are driving inflation: gasoline, housing costs, and meat.

https://twitter.com/MikePMoffatt/status/1471125492568838152

To be clear, as noted by StatsCan:

  • Oil production continues to remain below pre-pandemic levels though global demand has increased
  • Prices for fresh or frozen beef increased 15.4% year over year in November. Poor crop yields resulting from unfavourable weather conditions have made it more expensive for farmers to feed their livestock, in turn raising prices for consumers

https://twitter.com/stephen_tapp/status/1471120984702922757

So what is the takeaway here? That these are issues that the federal government has very little control over, and that the Bank of Canada raising interest rates won’t tackle either. And yet, we keep hearing demands for “concrete action” from the federal government on this, as though they could wave a want to fix it. Or if not a magic wand, then wage and price controls? Do we need to bring “Zap, you’re frozen!” out of retirement?

Continue reading →

Roundup: A rosier fiscal update

Posted on by

There was some drama around the delivery of yesterday afternoon’s fiscal update, as two members of Chrystia Freeland’s staff tested positive for COVID, and while she had not been around them recently, she decided that the prudent course of action was to stay isolated and deliver it virtually rather than in the Chamber. She also made it clear that this was not a budget or a mini-budget, but rather a look at where the nation’s books are, and it was a rosier picture than was anticipated in the spring’s budget.

There are no significant new spending promises in this document, aside from more money being set aside for COVID supports as the omicron variant bears down on us (which includes buying millions more rapid tests for the provinces to deliver—not that most have been good at it so far), as well as the $40 billion being set aside for compensation for Indigenous children in care and to fix the system going forward, and some money to help BC recover from their recent spate of natural disasters, and to reimburse seniors faced with GIS clawbacks. There are also some dollars being put toward reducing immigration backlogs, and helping ports deal with supply-chain snarls. But otherwise, it held the line, surprising some observers who like to chide this government’s profligacy. There was a gender section that laid out in stark terms how the pandemic affected women disproportionately.

https://twitter.com/kevinmilligan/status/1470867511021244418

https://twitter.com/kevinmilligan/status/1470871367746686979

https://twitter.com/kevinmilligan/status/1470873072383131648

https://twitter.com/LindsayTedds/status/1470873990373601286

https://twitter.com/LindsayTedds/status/1470875401253634050

As for opposition reaction, the Conservatives complain there’s nothing in there about inflation…which is the Bank of Canada’s job, and the only thing the federal government could do are wage and price controls. The NDP say there isn’t enough about the clawbacks in there, or not enough other support measures, but with the Bloc pretty much guaranteed to support it, they can afford to look tough in spite of being paper tigers.

Continue reading →

Roundup: Freeland is setting her policy own agenda—oh noes!

Posted on by

The Globe and Mail had a strange hit piece out yesterday that was largely targeted at Chrystia Freeland, but it was kind of all over the place and seemed to be missing the mark on a few different tangents. It was framed around Michael Sabia, the new-ish deputy minister of finance, and the fact that he hasn’t made any headway in reining in spending or coming out with a “growth agenda,” as though we aren’t still in a global pandemic that has required extraordinary government fiscal measures in order to keep the economy from spiralling into a depression, or the fact that the last budget was a growth agenda, but it was focused on inclusive growth rather than tax cuts, which a particular generation cannot wrap their heads around (and the fact that the piece singles out the childcare plan is evidence of this fact).

What was particularly troubling about the piece was the fact that it couldn’t quite decide how it was attacking Freeland. On the one hand, it worried that she was too hands-off in the department, leaving Sabia to manage it while she dealt with big policy items (for which she was attacked in absentia during Question Period yesterday), while at the same time, it is overly concerned that Department of Finance officials aren’t driving policy, but the government is. Which, erm, is kind of how things work in our system. The civil service is supposed to provide fearless advice but also do the work of implementing the policies and directives of their political bosses. That’s the whole point of a democracy—this is not a technocracy where the bureaucrats run the show, and if these sore Finance officials have a problem with that, perhaps they either need a refresher on how this works, or they need to find themselves out of the civil service.

https://twitter.com/kevinmilligan/status/1470409184076185600

None of this is particularly surprising, mind you—there are still too many pundits and journalists who still think it’s 1995 and will always be 1995, because that is the established media narrative by which they must always obey (and this hit piece also touches on the Cult of the Insider narrative as well with all of the anonymous inside sources). And the fact that Freeland is a woman holding the job, and is focusing on things like inclusive growth and not the usual “tax cuts=jobs” agenda frankly makes it too easy for the 1995 narrative to keep being circulated. But it’s not 1995, and perhaps it’s time that We The Media stop pretending otherwise, because this kind of hit piece was frankly something that should not have seen the light of day.

Continue reading →

Roundup: A big economic week ahead

Posted on by

It’s going to be a very big week in Canadian economics: Today is the day the Bank of Canada has their mandate to target inflation between one and three percent at an average of two percent gets renewed, with some additional language around employment in there (but not a dual mandate). Then Tuesday will be the government’s fiscal update, which isn’t expected to announce too many new things because there simply isn’t time for a budget implementation bill to accompany it. And then Wednesday, Statistics Canada will release the inflation figures for November, and it there remains a possibility it could go higher still before being expected to cool down by mid-next year. Because it’s largely about supply chains, and as the former governor of the Bank of Canada keeps reminding us, it’s not about the political situation or fiscal policy. The counterfactual is that if the government didn’t spend on pandemic supports and the Bank didn’t engage in quantitative easing, we would be in a deflationary depression cycle, and that would have left us all worse off.

With this in mind, here is economist Kevin Milligan with some added context:

https://twitter.com/kevinmilligan/status/1470099272632733696

https://twitter.com/kevinmilligan/status/1470100800261132288

https://twitter.com/kevinmilligan/status/1470102174076006401

https://twitter.com/kevinmilligan/status/1470103387714637827

https://twitter.com/kevinmilligan/status/1470104572261638146

https://twitter.com/kevinmilligan/status/1470105479288262657

Continue reading →

QP: Demanding the inflation target

Posted on by

With the prime minister virtually attending Biden’s “democracy summit,” and Chrystia Freeland absent, it was promising to be a rockier day in the Commons. Erin O’Toole led off, his script on his mini-lectern, and he brayed about inflation, housing prices, and coming interest rate hikes. Ahmed Hussen reminded him that they were the federal party that restored leadership to the housing file and he praised the National Housing Strategy. O’Toole raised the prospect of predicted food price hikes, and then pretended that Trudeau and Freeland were in the Chamber and not answer, and Randy Boissonnault, in his role as associate finance minster, reminded O’Toole about the Bank of Canada’s inflation target. O’Toole pretended that the prime minster ignored his responses about the Bank’s mandate and worried it would be changed, to which Boissonnault reminded him that the Bank is independent. O’Toole switched to French to misleadingly say that the Liberals planned to abandon the inflation targeting mandate, and Hussen repeated his first response, and called out the nonsense in the Conservatives’ supply day motion. O’Toole returned to braying about inflation in French, and Boissonnault repeated in French about the Bank’s mandate, before reciting some good news talking points.

Alain Therrien led for the Bloc, and he worried that the Auditor General showed that thirty percent of COVID tests were lost or mislabelled, for which Duclos said that he thanked the AG for her work, and said they would examine the results. Therrien worried about the stat that fourteen percent of those tested were never notified, but Duclos gave a bromide about working to prevent omicron.

Jagmeet Singh rose for the NDP, and after citing a report on growing inequality (I would be dubious of that given that the Canadian trajectory has not been the same as the US), and he demanded a tax on the super-wealthy, for which Boissonnault listed measures to help those in need. Singh repeated the question in French, and Boissonnault read measures in the Liberal platform about taxing banks and insurance companies.

Continue reading →

Roundup: Rejecting the compromise for more theatre

Posted on by

In spite of the Liberals proposing a compromise on the release of the Winnipeg Lab documents last week, the Conservatives have rejected the offer, citing that it was “months late,” and that the “will of parliament has not changed.” But this is wholly disingenuous—they did offer another compromise in June before Parliament rose for the summer, and Parliament dissolved before the challenge to the order could reach Federal Court, which may have settled the outstanding question of whether the Security of Information Act fettered parliamentary privilege or not.

This rejection makes it clear that this is not about the information—it’s about political theatre. If it was about the information, they would have let NSICOP review the documents and report back. But no—they first came up with the fiction that they didn’t trust security-trained public servants to properly redact the documents, and then they came up with the fiction that the prime minister redacts NSICOP reports, which he does not and never did, and handwaved about only trusting the Commons’ Law Clerk—who doesn’t have the training or context around national security to know what is a necessary redaction or not—to do redactions. (They also piled onto the same law clerk the redactions from pandemic documents for the health committee in the previous parliament, overloading his office and ensuring that they would never see all of the requested documents). The government provided avenues for the documents to be released, but the Conservatives have consistently decided that theatre was more important (particularly as they fed the “mystery” of these documents into conspiracy theories).

We’ll see how much patience the other parties have for this nonsense—and at this point, it is most definitely nonsense. They were happy enough to embarrass the government pre-election, so we’ll see if they still have the appetite to do so now. But at this point, this no longer has any bearing on accountability or being serious about national security. This is one hundred percent about political theatre, and it would be great if the pundit class of this country could call it out for what it is.

Continue reading →

QP: Shouting about the Bank of Canada’s mandate

Posted on by

Less than two hours after the prime minister announced that Canada would be engaging in a diplomatic boycott of the Beijing Olympics, he was present along with his deputy for QP. Erin O’Toole led off, script in front of him, and he lamented that there was no decision on Huawei and that Canada was the “last one” to announce the diplomatic boycott of the Olympics. Justin Trudeau have a paean about standing up for human rights and doing what is right. O’Toole then pivoted to uninsured mortgages and worried that interest rates would soon be rising and blamed the government for letting inflation run rampant—which doesn’t make any sense because rates were going to go up anyway and they are unnaturally low and them rising toward a neutral range would be a good thing. Trudeau reminded him that they had a plan around housing while the Conservatives only promised a tax break for landlords. O’Toole railed about inflation and demanded the government mandate the Bank of Canada maintain the Bank of Canada’s two percent inflation target, and Trudeau said they would renew it and then pointed that the Conservatives plans did nothing for affordability. O’Toole started yelling about inflation, and Trudeau shrugged this off as flailing. O’Toole switched to French to ask again that they renew the Bank’s inflation target, and this time Trudeau said that an announcement was forthcoming. 

Yves-François Blanchet rose for the Bloc, and he complained that border measures were too confusing, and Trudeau said that he understood that the new rules could be confusing but they were doing everything they could to keep Canadians safe. Blanchet gave a hypothetical travel plan and wondered to know what tests or constraints they would be subjected to, and Trudeau said that anyone travelling should consult with public health authorities, but they needed to protect Canadians. 

Jagmeet Singh led for the NDP, and he complained about housing and claimed the government has to tools to solve it — erm, except nothing immediately short of a Green Lantern ring. Trudeau praised the efforts that the government has been taken and are expanding. Singh complained in French that the government wasn’t building housing on federal lands in Montreal and accused Trudeau of giving it to a member of the Bronfman family. Trudeau lamented that he expected personal attacks from the Conservatives but not the NDP, before talking about partnering with Montreal.

Continue reading →