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The Bank of Canada today released its April Monetary Policy Report, which discusses current economic and financial trends in the context of Canada's inflation-control strategy.

Governor Tiff Macklem talks about how geopolitical, economic and social forces are changing global trade. He also discusses how Canada can benefit from trade shifts and prepare for future supply shocks.

Let me state at the outset that the speed and synchronized nature of the recent global downturn has resulted in a heightened degree of uncertainty, which is evident in the diverse views on the outlook.

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.

We study the competition between a welfare-maximizing public payment platform (e.g., CBDC or fast payment system) and a profit-maximizing private platform in a two-sided market, deriving optimal public pricing and showing how network effects, fragmentation, and policy mandates like zero fees or cost recovery shape welfare, usage, and fee incidence.

Businesses remain positive about the economic outlook, although some forward-looking indicators have eased from the levels recorded in recent surveys, and the strength in commodity prices has raised expectations for costs and inflation.

Erratum: Please note that the legend for Chart 9 (French version only) should read as follows: au-dessus de 3 % , rather than au-dessous de 3 %

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.

Governor Stephen S. Poloz discusses the evolution of the way the Bank takes a risk-management approach in the conduct of monetary policy, and what this implies for the recovery from the pandemic.

We examine the optimal amount of user anonymity in a central bank digital currency in the context of bank lending. Anonymity, defined as the lender’s inability to discern an entrepreneur’s actions that enable fund diversion, influences the choice of payment instrument due to its impact on a bank’s lending decisions.