Bank of Canada often uses the phrase — There is considerable
monetary policy stimulus in Canada; which, in ordinary terms means, that there is a significant supply of money in Canadian economy.
Instead, Carney remains the only central banker in the G7 to indicate that he might actually raise rates, noting «that he
considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.»
Hardening its resolve that the days of ultra-cheap money must come to an end, the central bank Tuesday stopped describing higher borrowing costs as a possibility, stating unequivocally that «over time, some modest withdrawal
of monetary policy stimulus will likely be required.»
«While
less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate,» the policy statement said.
Hedge fund managers like Greenlight Capital's David Einhorn constantly harped about the artificial «sugar high» the
aggressive monetary policy stimulus was inflicting on both markets and the economy.
Senior deputy governor Carolyn Wilkins recently said that given continued and broadening growth, the central bank would assess whether the «considerable
monetary policy stimulus presently in place is still required.»
«While some modest withdrawal
of monetary policy stimulus will likely be required over time, consistent with achieving a two per cent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of the imbalances in the housing sector suggest that the timing of any such withdrawal is less imminent than previously anticipated.»
What's more, the ballyhooed transition from central
bank monetary policy stimulus to federal government fiscal policy stimulus is compromised by splintering across the political spectrum.
His normally boilerplate explanation for his interest rate decision contained a new line: «Some modest withdrawal of the present
considerable monetary policy stimulus may become appropriate.»
At the lower end of the income spectrum, in particular, households that went through foreclosure or had underwater mortgages were less able to take advantage of low interest rates, which curtailed the effect of
the monetary policy stimulus, Raskin noted.
With the Fed looking set to raise interest rates in December, other central banks may also follow suit and start to clip back on rate - easing and
monetary policy stimulus.
When the Bank of Canada says «some modest withdrawal of the present considerable
monetary policy stimulus may become appropriate,» what they are really saying is that they are not going to cut rates.
The «current outlook,» it announced in July, when it hiked the target overnight rate for the first time since 2010, «warrants withdrawal of some of
the monetary policy stimulus in the economy.»
Any further reduction in
monetary policy stimulus would need to be carefully considered.
Any further reduction in
monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.