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A surprisingly hawkish BoC meeting

April 22, 2021

chart depicting central bank benchmark interest rate hikes from 2009 - 2014

Source: Bloomberg

The Bank of Canada announced yesterday that it will reduce bond purchases by 25 percent beginning next week and hinted that it could hike its benchmark policy rate as soon as the second half of next year. The bank’s statement also indicated that the recovery still requires “extraordinary” support, but this was overall a much more hawkish outcome than had been expected and perhaps a first sign that the strong economic recovery will spur at least some monetary response.

It is also reasonable to expect that this cycle will to some degree mirror that of a decade ago, when the Fed remained on the sidelines for an extended period while many other central banks lifted rates. Within the first two years of the last U.S. expansion, in fact, the European Central Bank, the People’s Bank of China, the Reserve Bank of India, the Central Bank of Brazil, the Bank of Korea, the Reserve Bank of Australia, and the BoC all tightened policy, some aggressively so. By the time the Fed finally moved in 2015, every major central bank in the world save the Bank of Japan and the Bank of England had already beaten it to the punch (this despite the fact that U.S. economic growth, as modest as it was at the time, was largely in line with that in other large markets). The tightening trend is unlikely to be quite so widespread in this cycle – it is a safe bet that the ECB won’t repeat its ill-fated 2011 rate hikes this time around, for example – but the Fed is still shaping up to be a laggard given its rhetoric and the recent shifts in its framework. Other central banks have pursued similarly aggressive easing policies, but few have been as committed to sustaining them.

Daily Trivia

Who made his acting debut in Star Trek Beyond, less than two years after his firm released a product inspired by the Starship Enterprise’s on-board computer?

Previous Question

What film character has long been thought to represent IBM, especially given that its name appears to be an easily-deciphered cryptogram?


HAL (2001: A Space Odyssey)


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