A new blog popped up while I've been on vacation: true dough, written by a prolific (averaging about 2 posts a day!), anonymous (so far) woman who is a welcome addition to the still-way-too-small club of Canadian economics bloggers.
When the Bank raised the overnight rate target by 25 basis points to 4.25% on May 24, it seemed to be for the last time (after seven such raises since last September), barring a significant change in the data:
BoC Press release: ...[T]he target for the overnight rate is now at a level that is expected to
keep the Canadian economy on the base-case path projected in the April Monetary Policy Report (MPR) and to return inflation to the 2 per cent target.
There doesn't seem to be any strong reason to think that the Bank has seen anything that would warrant deviating from this conclusion: inflation is still in the middle of the Bank's target range. Moreover, strong employment growth has been accompanied by high levels of fixed business investment. Even though the Bank's official indicators suggest that output is at or above capacity, my feeling is that those measures overstate what inflationary pressures might be out there. And then there's the fact that the Bank has not been hinting about wanting to revisit the wording in the May 24 statement.
This time, the Bank will not follow the Fed's lead. Nor do I see a reason why it should.
One of the highlights of my graduate school years was the lecture where I learned about Arrow's Impossibility Theorem. It's hard to imagine an question more important to the social sciences that the social choice problem: how can we aggregate individual preferences into a coherent social order? Arrow's answer is that we can't, but that doesn't make the issue less important. Of course, from the perspective of a graduate student looking for a thesis topic, Arrow did his job rather too well: you had to be a serious math jock to identify and solve an issue he hadn't already dealt with. And I'm by no means a math jock.
But it turns out that my modest skills as an econometrician are useful in attacking the social choice problem using another approach, one that is as old as the social choice problem itself, but of which I was unaware until it was explained to me by my colleague Michel Truchon.