Why MNI
MNI is the leading provider
of 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.
Bank of Canada Governor Tiff Macklem
Bank of Canada Governor Tiff Macklem said Wednesday he will seek to restore a more normal balance sheet after beginning to lift interest rates, declining to say if he can go further than other central banks that failed to fully unwind QE after the 2008 financial crisis.
"An important element of sort of completing this first use of quantitative easing will be to, when the time is right, let the balance sheet move down and get back to more normal levels, so yes, that is certainly something that is coming,” he said in response to a question from MNI at a press conference following a speech.
Canada avoided QE in 2008 but during the pandemic was more aggressive than the Fed or ECB in buying up almost half the stock of federal government bonds. The Bank's balance sheet grew from CAD120 billion to CAD575 billion and in recent months policymakers have held it at around CAD500 billion. There are currently no plans to actively sell off assets after interest rates rise, Macklem said.
The Bank is pivoting to a path of rate hikes, Macklem said in earlier comments around a speech, and most economists see a move at the next meeting on March 2 from today's record low 0.25% rate. “There is a broad range of indicators that suggest slack has been absorbed, the need for emergency level monetary policy has passed,” Macklem told reporters. The pace of rate hikes isn't on autopilot and decisions will be made based on conditions at each meeting, he reiterated.
TRUCKER BORDER BLOCKADES
Conference Board Chief economist Pedro Antunes told MNI the Bank can wait until April to hike and move just three times this year with global inflation pressures likely to ease in the second half. Macklem today also suggested inflation pressures are global and should unwind late this year.
The economy faces near-term weakness if trucker blockades of border crossings that popped up in the last few days persist, Macklem said.
“If there were to be prolonged blockages at key entry points into Canada, that could start to have a measurable impact on economic activity,” he said, noting that so far shutdowns haven't lasted very long. “I do hope these blockages can end quickly, we’ve already got a strained global supply chain, we don’t need this.” The Bank last month predicted Q1 growth at a 2% annualized pace.
Why MNI
MNI is the leading provider
of 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.