Search

There is increasing international consensus that monetary policy can contribute to productivity growth and rising standards of living by establishing a stable, low-inflation environment, Bank of Canada Governor Gordon Thiessen told The Fraser Institute in a speech today.

Deputy Governor Rhys Mendes speaks about how the Bank of Canada assesses underlying inflation, including the use of measures of core inflation. He also touches on the renewal of the monetary policy framework, which happens in 2026.

During the 1990s, central banks in the industrialized countries made important changes in the way they operate. As part of these initiatives, central banks have endeavoured to define a set of best practices, learning from each other in the process. The goal was to improve and adapt the frameworks within which monetary policy is implemented. Clarifying Objectives A clear objective is a necessary starting point for any policy framework. The growing consensus that price stability is the most appropriate objective for monetary policy was perhaps one of the most critical developments of the past decade. Price stability is now universally regarded as the key contribution that monetary policy can make to promote sustainable growth and maximize the level of employment. Central banks also need a clear strategy for achieving their objective. A major development of the past decade was the growing popularity of inflation targets as the numerical focus for monetary policy. Clearly defined inflation targets focus policy on the variable that is directly associated with price stability. The Bank of Canada was one of the first to adopt (in 1991) a set of targets for inflation over a specified time horizon. Accountability Many central banks have acquired greater independence and this, together with the public's desire for more information from key public institutions, has raised the standards for accountability. At the same time, explicit targets provide a clear measure against which to judge the performance of the monetary authorities. Increased accountability also has implications for the overall transparency of the monetary authorities. In sum, central banks have become much more open institutions and are placing greater emphasis on their communications activities. As an example, comprehensive inflation reports have become key communications vehicles for a number of central banks. Many of the changes implemented by central banks stem from the desire to improve the credibility of monetary policy, thus making it easier for monetary authorities to achieve their objectives. Although it is difficult to ascertain the overall effect of the evolving policy framework, it is encouraging that inflation and inflation expectations were at low levels at the end of the 1990s, thus providing a solid base for monetary policy in the future.

The Bank of Canada today released the document Renewal of the Inflation-Control Target: Background Information, which describes Canada's experience with inflation targeting, reports on some key issues bearing on the framework for conducting monetary policy, and identifies issues warranting further research.

On Thursday, November 7, 2024, the Bank of Canada will host its annual economic conference. This year’s theme is “Frontiers of Monetary Policy Design”.  Academics, policy-makers, private sector economists and representatives from policy think tanks will be among those in attendance.

The overnight market is an active forum where participants with a temporary surplus or shortage of funds can lend or borrow until the next business day. The level of interest rates in the overnight market has always been closely linked to the Bank of Canada's monetary policy operations. In this article, the authors describe the evolution of the market from its roots in the 1950s, the development of the Bank's monetary policy operations in the market, and how the market operates today. They also examine the outlook for the overnight market, particularly the implications of the new Large-Value Transfer System.

The Bank of Canada today outlined details of its plan to adopt a system of eight “fixed” or pre-specified dates each year for announcing any changes to the official interest rate it uses to implement monetary policy—the rate of interest it charges on short-term loans to financial institutions.

Indeed, a strong research environment has long been a hallmark of the Bank. We also want to encourage research relevant to our business, especially with respect to monetary policy and financial system stability, at universities all across Canada.

In 2021, the Bank of Canada and the federal government renewed the agreement on Canada’s monetary policy framework. To inform our discussions, the Bank conducted a broad range of public outreach activities between 2019 and 2021. This report summarizes our findings.

10:30 (ET)
The Market Participants Survey is conducted quarterly. Bank of Canada staff reach out to a diverse set of participants in financial markets to gather their views on key macroeconomic and financial variables as well as on monetary policy.