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  • May 17, 2000

    Bank of Canada Raises Target Overnight Rate by ½ Percentage Point to 5¾ Per Cent

    The Bank of Canada raised its target for the overnight rate by one-half of one percentage point to 5¾ per cent. The operating band for the overnight rate was correspondingly increased, and the Bank Rate is now 6 per cent.
    Content Type(s): Press, Press Releases
  • May 16, 2000

    Recent Developments in the Monetary Aggregates and Their Implications

    Narrow Money—Transactions Money The growth rate of the narrow monetary aggregates picked up in 1999, reflecting the expansion in economic activity and the stabilization of interest rates. The sharp acceleration of the narrow aggregates in recent months suggests buoyant growth in GDP in coming quarters. Signs of a possible rise in inflation are also emerging. Over the longer run, for inflation to remain in the Bank's 1 to 3 per cent target range, the growth of narrow money would have to slow down from its current pace. In 1999, the growth rate of M1 also began to converge with that of the other narrow aggregates, M1+ and M1++. This suggests that the influence of the special factors that have been affecting the growth rate of M1 has diminished. Broad Money—"Store of Value" Household savings represent deferred consumption, and therefore the broad monetary aggregate provides information about future spending and, hence, inflation. In 1999, the very broad measure of money, M2++, grew at much the same rate as it did in 1998. This outcome is in line with inflation remaining in the inflation-control target range over the next couple of years.
  • May 16, 2000

    Opening Statement before the House of Commons Standing Committee on Finance

    Opening Statement Gordon Thiessen House of Commons Standing Committee on Finance
    Last week, we released our eleventh Monetary Policy Report. Since our November Report, the Canadian economy has outperformed expectations. Bolstered by vigorous external and domestic demand, Canada's economic expansion strengthened in the second half of 1999 and into early 2000.
    Content Type(s): Press, Speeches
  • May 16, 2000

    Bank of Canada Review - Spring 2000

    BoC Review - Spring 2000

    Cover page

    A Seventeenth-Century Collector's Guide

    This volume, as well as the coins, forms part of the National Currency Collection, Bank of Canada, which, in addition to its numismatic holdings, also houses a reference library of more than 8,000 books, pamphlets, periodicals, and catalogues about money and banking.

    Photography by James Zagon.

  • May 15, 2000

    Credibility and Monetary Policy

    A highly credible monetary policy helps to reduce the degree of uncertainty that can surround the objectives of such policy. When the monetary policy pursued by the central bank is credible, the expectations of the public are focused on a target. If the public believes that the Bank will act to bring inflation back to the target, then its expectations will not react so strongly to fluctuating price trends. In turn, fluctuations in inflation, interest rates, output, and employment should be less pronounced than in the absence of such credibility. The adoption of inflation control as a monetary policy objective by some countries has led central banks to take steps to enhance the credibility of monetary policy. For the Bank of Canada, these include * the publication of our Monetary Policy Report each May and November, with formal updates each February and August * the initiation of communications activities across the country * the use of the overnight interest rate as a short-term operating target * the issuing of a press release each time the Bank changes its key rates To date, most of the studies on this topic have concluded that success in keeping inflation within a target range has helped to increase the credibility of Canadian monetary policy. These surveys suggest that expected inflation, which stood at about 5 per cent in 1990, declined to around 2 per cent by 1999 (Chart 1, page 15). Indeed, according to these surveys, for the entire period during which the Bank has had a target range for inflation, expected inflation rates have remained within that range. Inflation expectations have also reacted very little to changes in the total CPI, suggesting that the targets have helped to focus expectations on the target rate and have thus enhanced the credibility of monetary policy (Chart 2, page 16). One particular study shows that the life of collective wage agreements in Canada has been increasing and that the number of such agreements containing cost-of-living adjustment (COLA) clauses has steadily declined. The authors of this study suggest that this may reflect the greater credibility of Canadian monetary policy (Table 1, page 16). The proportion of mortgages with five-year terms is now higher than it was in the mid-1980s, and many financial institutions have been offering 7- to 10-year mortgages. This also suggests that inflation targets have gained credibility.
  • May 11, 2000

    Monetary Policy Report - May 2000

    The global economy has shown greater strength than was anticipated at the time of the November Report.
  • May 11, 2000

    Release of the Monetary Policy Report

    Opening Statement Gordon Thiessen
    Content Type(s): Press, Speeches
  • May 11, 2000

    Bank of Canada releases its semi-annual Monetary Policy Report

    The Bank of Canada today released its eleventh Monetary Policy Report in which it discusses economic and financial trends in the context of Canada's inflation-control strategy. The Monetary Policy Report is published every May and November.

    Content Type(s): Press, Press Releases
  • May 8, 2000

    Bank of Canada to Stop Issuing $1000 Note

    The Bank of Canada announced today that, effective May 12, it will stop issuing $1000 bank notes and will begin to withdraw them from circulation. The announcement follows the federal government's approval of an amendment to the Bank of Canada Notes Regulations to eliminate the $1000 note as part of the fight against money laundering […]
    Content Type(s): Press, Press Releases
  • Probing Potential Output: Monetary Policy, Credibility, and Optimal Learning under Uncertainty

    Staff Working Paper 2000-10 James Yetman
    The effective conduct of monetary policy is complicated by uncertainty about the level of potential output, and thus about the size of the monetary policy response that would be sufficient to achieve the targeted inflation rate. One possible response to such uncertainty is for the monetary authority to "probe," interpreted here as actively using its policy response to learn about the level of potential output.

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