Close X
Sunday, November 24, 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

3 Asian Nations Warn Citizens Not To Use Marijuana In Canada

3 Asian Nations Warn Citizens Not To Use Marijuana In Canada
BEIJING — Marijuana may be legal now in Canada but at least three Asian governments are warning their citizens to avoid it, including the spectre of possible arrest for Japanese and South Koreans.

3 Asian Nations Warn Citizens Not To Use Marijuana In Canada

Father, Now A Woman, Gets 18-Month Sentence For Sexually Assaulting Daughter

Father, Now A Woman, Gets 18-Month Sentence For Sexually Assaulting Daughter
The transgender woman, who cannot be named to protect the victim's identity, was sentenced to 18 months Monday for sexual assaults carried out when she was still a man.

Father, Now A Woman, Gets 18-Month Sentence For Sexually Assaulting Daughter

The Dilawri Foundation donates $5 Million to Vancouver Public Library

Iconic downtown library to expand children’s services to meet surging demand, rename plazas facing Robson and Georgia streets Dilawri Square

The Dilawri Foundation donates $5 Million to Vancouver Public Library

Alberta Man Accused Of Threatening Call To Public Safety Minister Ralph Goodale Found Not Guilty

Alberta Man Accused Of Threatening Call To Public Safety Minister Ralph Goodale Found Not Guilty
CALGARY — A judge has found an Alberta man not guilty of making threats against Canada's public safety minister.

Alberta Man Accused Of Threatening Call To Public Safety Minister Ralph Goodale Found Not Guilty

Missing Children Cases Can Have Happy Endings, Says Mom Who Reunited With Son

TORONTO — A mother who has reunited with her son 31 years after he was allegedly abducted says she's living proof that missing children cases can have happy endings.

Missing Children Cases Can Have Happy Endings, Says Mom Who Reunited With Son

Under Fire For Inciting Violence, Trump Refocuses Attacks On U.S. Media

WASHINGTON — U.S. President Donald Trump is again setting his sights on the mainstream media as he seeks to deflect withering criticism of his firebrand style of angry political rhetoric.

Under Fire For Inciting Violence, Trump Refocuses Attacks On U.S. Media