Search

The Annual Report provides an account of the Bank’s management, activities and achievements in 2015; it includes the financial statements and a message from Governor Stephen S. Poloz.

We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities.

In 2010, the economic recovery became firmly entrenched. The Bank’s Annual Report provides a Message from the Governor, highlights key achievements over the year, describes the Bank’s corporate governance, presents its financial statements, and discusses financial results.

Deputy Governor John Murray discusses monetary policy decision-making at the Bank of Canada.

Six months ago, at the time of the last Monetary Policy Report, the global economic and financial environment was volatile and highly uncertain because of the adverse situation in Asia and the fallout from the Russian debt moratorium.

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.

Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

Commentary and technical data relating to the 2021 renewal.