Search

This letter is reproduced as submitted by the respective author, and has not been edited or proofread by the Bank of Canada. It is intended for reference only, and should not be cited or distributed elsewhere.

The year that just passed posed many challenges for all Canadians. The slowdown in the global economy became more pronounced as the year went on, and this affected households, businesses, and governments alike. The tragedy of 11 September compounded the economic difficulties and issues facing us all. Through this period of rapidly changing circumstances, the Bank met its responsibilities by responding quickly and vigorously to events in order to underpin confidence and support the economy.

Recently, the Bank of Canada has estimated the effective lower bound (ELB) on its policy interest rate to be about -50 basis points. This article outlines the analysis that underpins that estimate by quantifying the costs of storing and using cash in Canada. It also explores how some international markets have adapted to negative interest rates, issues surrounding their implementation, as well as their transmission to other interest rates in the economy. Finally, it discusses theoretical ideas on how the ELB could be reduced further.

09:45 (ET)
On eight scheduled dates each year, the Bank of Canada announces the setting for the overnight rate target in a press release explaining the factors behind the decision. Four times a year, Governing Council presents the Monetary Policy Report: the Bank’s base-case projection for inflation and growth in the Canadian economy, and its assessment of risks.

Bank of Canada published a report establishing a set of principles to guide the extraordinary liquidity interventions it was making in response to the systemic shocks buffeting the Canadian financial system. These principles provided a framework for maintaining consistency between the Bank’s actions and its responsibilities as lender of last resort to the financial system, while allowing sufficient fl exibility to respond to the unique challenges of the crisis.

The Bank of Canada today raised its Bank Rate by ¼ of one percentage point to 5 per cent.

The Bank of Canada today conducted an Overnight Repo (OR) operation, which is a regular tool that is part of the Bank’s standard operating framework for implementing monetary policy.

The ultimate goal of Canadian monetary policy is to help our economy achieve its maximum sustainable growth, and thus contribute to rising living standards for Canadians. The best way to achieve this goal, we've learned from experience, is to keep inflation low, stable, and predictable.

09:45 (ET)
On eight scheduled dates each year, the Bank of Canada announces the setting for the overnight rate target in a press release explaining the factors behind the decision. Four times a year, Governing Council presents the Monetary Policy Report: the Bank’s base-case projection for inflation and growth in the Canadian economy, and its assessment of risks.

Thank you for inviting me here today. It is a pleasure to be with you. This afternoon, I would like to talk about liquidity and the role of the Bank of Canada.