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Central banks may face challenges in achieving their price stability goals when financial stability risks are present. There is, however, considerable heterogeneity among central banks with respect to how they manage these potential trade-offs.

There is widespread agreement that, in the United States, higher house prices raise consumption via collateral or possibly wealth effects. The presence of similar channels in Canada would have important implications for monetary policy transmission.

A key issue in the renewal of the inflation-control agreement is the question of the appropriate level of the inflation target. Many observers have raised concerns that with the reduction in the neutral rate, and the experience of the recent financial crisis, the effective lower bound (ELB) is more likely to be binding in the future if inflation targets remain at 2 per cent.

Emerging-market economies have become increasingly important in driving global GDP growth over the past 10 to 15 years. This has made timely and accurate assessment of current and future economic activity in emerging markets important for policy-makers not only in these countries but also in advanced economies.

This paper evaluates the usefulness of various measures of core inflation for the conduct of monetary policy. Traditional exclusion-based measures of core inflation are found to perform relatively poorly across a range of evaluation criteria, in part due to their inability to filter unanticipated transitory shocks.

In an open economy such as Canada’s, exchange rate movements can have a material impact on consumer prices. This is particularly important in the current context, with the significant depreciation of the Canadian dollar vis-a-vis the U.S. dollar since late 2012.

Bank of Canada research done prior to the most recent renewal of the inflation-control agreement in 2011 concluded that the benefits associated with a target below 2 per cent were insufficient to justify the increased risk of being constrained by the zero lower bound (ZLB) on nominal interest rates.

Because financial and macroeconomic conditions are tightly interconnected, financial stability considerations are an important element of any monetary policy framework. Yet, the circumstances under which it would be appropriate for the Bank to use monetary policy to lean against financial risks need to be more fully specified (Côté 2014).

In this paper, we investigate how liquidity conditions in Canada may affect domestic and/or foreign lending of globally active banks and whether this transmission is influenced by individual bank characteristics.

The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems.