Close X
Sunday, November 10, 2024
ADVT 
National

Higher Interest Rate Target? Expanded Mandate? Bank Of Canada Explores Options

Darpan News Desk The Canadian Press, 20 Nov, 2018 01:27 PM
  • Higher Interest Rate Target? Expanded Mandate? Bank Of Canada Explores Options
OTTAWA — The Bank of Canada is studying whether it should make changes to the framework that has underpinned its policy decisions — such as interest-rate movements — for nearly four decades.
 
 
In a speech Tuesday, senior deputy governor Carolyn Wilkins said the current inflation-targeting approach has improved the economic and financial well-being of Canadians since it was established in 1991.
 
 
But after a decade in the post-financial-crisis environment, she said it has become clear the bank's mandate of helping inflation stay close to its target of two per cent has its down sides.
 
 
"Even a well-functioning monetary-policy framework deserves an open-minded discussion, particularly in the post-crisis world we live in," Wilkins said in prepared remarks of her address at McGill University in Montreal.
 
 
"There are a couple of challenges facing our framework that mean it may not serve the economic and financial welfare of Canada in the future as well as it has in the past."
 
 
One key issue, she noted, is that interest rates are no longer expected to rise as high they had before the crisis, which means there will be less room — or "conventional firepower" — for the bank to cut rates in an economic downturn.
 
 
The bank, which is on a rate-hiking path, has said it expects its benchmark interest rate to eventually settle somewhere between 2.5 and 3.5 per cent, about two percentage points lower than it was in the early 2000s.
 
 
Another concern, Wilkins said, is that lower rates may entice Canadians and investors to take on excessive risk — leaving the economy exposed to the ups and downs of financial cycles. Long-running low-rate conditions have encouraged Canadian households to amass record levels of debt.
 
 
She said the Bank of Canada is conducting research on alternative frameworks, including a higher target for inflation and a more-flexible, dual mandate that would extend the bank's focus to also incorporate labour and other economic indicators.
 
 
The work, which is an effort with the federal Finance Department, is underway in the lead-up to the Bank of Canada's next five-year renewal of its inflation-control agreement with the government. The next renewal is set for 2021.

MORE National ARTICLES

Retired Hab Steve Begin Graduates High School 22 Years After Dropping Out

MONTREAL — Former NHL left-winger Steve Begin made nearly $7 million during his career and started an engineering company after retiring from the game, but he always felt he was missing something.

Retired Hab Steve Begin Graduates High School 22 Years After Dropping Out

Jet Buffeted By Winds Before Overshooting Halifax Runway: Investigator

HALIFAX — The Boeing 747 cargo jet that overshot a Halifax runway this week had touched down in rainy conditions while being buffeted by a crosswind with a potential tailwind, the Transportation Safety Board of Canada said Thursday.

Jet Buffeted By Winds Before Overshooting Halifax Runway: Investigator

Community Where No One Wanted To Be Mayor Gets A Mayor, But Only Reluctantly

Community Where No One Wanted To Be Mayor Gets A Mayor, But Only Reluctantly
There were no mayoral candidates in Monday's province-wide municipal elections, so the provincial government simply appointed the outgoing mayor, Alcide Bernard, to a four-year term.

Community Where No One Wanted To Be Mayor Gets A Mayor, But Only Reluctantly

Pipeline Blast Forces FortisBC To The Open Market For Natural Gas Supply

Pipeline Blast Forces FortisBC To The Open Market For Natural Gas Supply
VANCOUVER — FortisBC is looking at several options to boost its stock of natural gas in an effort to get its customers through the winter after a pipeline blast squeezed off supply.

Pipeline Blast Forces FortisBC To The Open Market For Natural Gas Supply

B.C. Lawsuits Allege Government Social Worker Took Cash From Foster Children

VANCOUVER — Lawsuits have been filed on behalf of two youth in British Columbia Supreme Court alleging a provincial social worker siphoned off thousands of dollars in financial benefits from children in care.

B.C. Lawsuits Allege Government Social Worker Took Cash From Foster Children

B.C. MLA To Pay Back $244 In Food Money Received During Welfare Challenge

B.C. MLA To Pay Back $244 In Food Money Received During Welfare Challenge
VICTORIA — Vancouver New Democrat Mable Elmore says she will refund $244 in food expense money she claimed while participating in last year's welfare food challenge that involved her living on $19 a week.

B.C. MLA To Pay Back $244 In Food Money Received During Welfare Challenge