- G10 Markets
- Fixed Income
- Foreign Exchange
- Emerging Markets
- MNI Research
- Global Macro
- Political Risk
- About Us
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
- G10 Markets
- Emerging MarketsEmerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
Real-time insight of oil & gas markets
Reporting on key macro data at the time of release.
- MNI ResearchMNI Research
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
- About Us
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.Free Access
MNI INTERVIEW: BOC Seen Pausing Rest of Yr- CD Howe's Robson
Canada has good cause to keep interest rates steady for the rest of the year as past hikes drag inflation close to target and the cumulative tightening by global central banks slows demand, Bill Robson, head of the CD Howe Institute think-tank and its shadow monetary policy council, told MNI.
“I’m quite optimistic about the path of inflation—and I’m paid to worry,” said Robson, whose organization often hosts events with top central bankers and economic policy officials.
Investors haven't been so resolute about a long pause, betting earlier this year on a rate cut and more recently some saying a final quarter-point hike is possible in the next few months. Bank Governor Tiff Macklem says he expects to hold his 4.5% rate for a while unless there's an accumulation of evidence his forecast is off track for inflation to slow to 3% around mid-year and return to the 2% target in 2024.
“It wouldn’t be at all surprising to see the rate hikes the Bank of Canada has done already, and the Fed has done, work their way through the economy and continue to bring inflation down,” Robson said on MNI's FedSpeak podcast. The Bank's overnight rate has climbed from 0.25% since last March, one of the sternest campaigns in decades, and inflation has slowed from 8.1% in June to 5.9% last month.
GLOBAL OVERSHOOTING RISK
While the job market remains strong, it's "notorious" for being one of the last parts of the economy to show momentum swings, said Robson, whose organization also dates Canadian business cycles and recessions. Job gains are also a hopeful sign that the economy can avoid a painful downturn, he said.
“We’re going to continue to see consumers pulling back in more interest-rate sensitive areas,” he said. “It’s likely that we are going to see at least a couple of very soft quarters, it wouldn’t be at all surprising to see a couple of negative quarters.” (See: MNI INTERVIEW: BOC Has Strong Case to Cut This Year-Ex Adviser)
Central banks collectively face an overshooting risk, Robson said, similar to how looser fiscal and monetary policy during Covid contributed to the inflation wave. “When everybody is doing the same thing, it does heighten that risk, and so one of the things that we may have to deal with is some accident, some source of unexpected financial pressure.”
Restoring inflation to 2% next year will also help the Bank of Canada fend off recent political criticism and avoid more meddling the next time its mandate is up for renewal with the government, Robson said. The last renewal added unhelpful clutter by inserting language about seeking full employment when the inflation target is being met, he said.
CANADIAN DOT PLOT?
"There was clearly more than one set of fingers on the keyboard at that last mandate renewal,” he said. “What I would like to see in the next round is the whole thing getting kind of cleaned up.”
The recent move to publish meeting minutes will help deliver the inflation message, though it would be nice to go further and consider a group of outside policy makers and publish an expected path of interest rates, Robson said. One challenge is that only the Governor is legally responsible for monetary policy, so a Fed-style dot plot is probably unworkable.
While officials at the Bank see those moves as too strong, Robson noted inflation targeting was also originally seen as a fairly radical innovation when it began in the 1990s.
“The greater degree of transparency gives you a lot more nuance, and I think people’s discussions of Fed policy are better because they can see how the members are thinking and how they are thinking differently,” he said.
Sign up now for free access to this content.
Please enter your details below and select your areas of interest.
Why Subscribe to
MNI is the leading providerof intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.
Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.