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Bank of Canada Governor Mark Carney discusses the future of monetary policy.

This issue of the Financial System Review focuses on the impact of COVID 19. The pandemic presents an unprecedented shock to the Canadian economy. This report identifies the effects on the Canadian financial system and explains how recent actions by the Bank and other policy-makers are helping to manage them. It further describes how a resilient financial system can help households and businesses smooth the effects of the COVID-19 shock and prepare for a robust recovery.

Gosselin examines and reports on the various factors that contribute to successful inflation targeting. Using a panel of 21 inflation-targeting countries over the period 1990Q1-2007Q2, Gosselin finds that the ability of central banks to hit their targets varies considerably. Some of these differences can be explained by exchange rate fluctuations, fiscal deficits, and differences in financial development. Others are explained by differences in the targeting framework itself and the manner in which it is implemented.

Deputy Governor Lawrence Schembri examines the success of the Bank’s monetary policy framework and explains the review being undertaken before its renewal in 2021.

This Report presents the Bank of Canada’s assessment of the trend of inflation in Canada and explains the monetary policy actions deemed necessary to keep inflation within the Bank’s inflation-control target range.

This monthly 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.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.

Deputy Governor Lawrence Schembri discusses household debt, the risk it poses to financial stability and the role of the Bank of Canada.

The Governing Council judges that the risks to the stability of Canada’s financial system remain high, as they were at the time of the June FSR. The sources of the key risks are similar to those highlighted in June, and emanate primarily from the external environment.

This issue of the Financial System Review reflects the Bank’s judgment that the high level of household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities are still elevated, improving economic conditions and recent changes to housing policy should support an easing of these vulnerabilities over time. A third vulnerability highlighted in the FSR concerns cyber threats and the interconnectedness of the financial system.