The neutral rate of interest is important for central banks because it helps measure the stance of monetary policy. We present updated estimates of the neutral rate in Canada using the most recent data. We expect the COVID-19 pandemic to significantly affect the fundamental drivers of the Canadian neutral rate.
Governor Tiff Macklem outlines how the COVID-19 recession has had an uneven impact on Canadians and discusses the Bank’s decision yesterday to leave the policy rate unchanged.
Governor Tiff Macklem discusses the Bank’s latest interest rate announcement and explains the uneven impact that the COVID-19 pandemic is having on different sectors and people.
The Bank of Canada has taken many actions to support Canadians since the COVID-19 pandemic struck. These include large-scale asset purchases—buying a substantial amount of government bonds and other financial assets. Our purchases serve two purposes. They help key financial markets work properly, and they can help increase spending in the economy. This leads to more employment and stronger economic growth.
Remarks (delivered virtually)Timothy LaneCFA Society Winnipeg and Manitoba Association for Business EconomicsWinnipeg, Manitoba
Deputy Governor Timothy Lane explains how the Bank is helping Canadian households and businesses weather the COVID-19 crisis, and how our actions today are laying a solid foundation for our future economic recovery.
We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes.
This equilibrium model explains the trend in long-term yields and business-cycle movements in short-term yields and yield spreads. The less-frequent inverted yield curves (and less-frequent recessions) after the 1990s are due to recent secular stagnation and procyclical inflation expectations.