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

Canadian Moose Hunter Accused Of Illegally Entering The United States

Canadian Moose Hunter Accused Of Illegally Entering The United States
JACKMAN, Maine — U.S. Border Patrol agents have arrested a Canadian citizen who they say illegally entered the U.S. and hunted moose.

Canadian Moose Hunter Accused Of Illegally Entering The United States

'Not Trying To Be On The Front Page:' Toronto Mayor John Tory On Re-Election Bid

'Not Trying To Be On The Front Page:' Toronto Mayor John Tory On Re-Election Bid
TORONTO — Headlines and TV highlight clips are overrated, Mayor John Tory is saying at a Toronto diner shortly after he took his mother to vote in front of photographers ahead of Monday's municipal election.

'Not Trying To Be On The Front Page:' Toronto Mayor John Tory On Re-Election Bid

B.C. Police Watchdog Says Court Orders Vancouver Police To Co-Operate With Probe

B.C. Police Watchdog Says Court Orders Vancouver Police To Co-Operate With Probe
VANCOUVER — British Columbia's police watchdog says a court has backed its investigation into a fatal shooting by police two years ago.

B.C. Police Watchdog Says Court Orders Vancouver Police To Co-Operate With Probe

B.C. Teen Gives Away Tickets To Ellen Degeneres Show, Plans O Canada Welcome

VANCOUVER — A 14-year-old girl's quest to give away two tickets to Ellen Degeneres's appearance in Vancouver has turned into an 82-ticket giveaway complete with all the "winners" singing O Canada before show time.

B.C. Teen Gives Away Tickets To Ellen Degeneres Show, Plans O Canada Welcome

One Smart Cookie: Edmonton Girl Guide Sells Out Of Cookies Near Cannabis Store

As people lined up to buy cannabis at one of six Edmonton cannabis stores that opened Wednesday a small entrepreneur stood ready to capitalize on what could be expected to be customers' future need for a sweet snack.

One Smart Cookie: Edmonton Girl Guide Sells Out Of Cookies Near Cannabis Store

Manitoba Man Sentenced To Eight Years In 'Horrific' Death Of His Young Daughter

WINNIPEG — A Manitoba man has been sentenced to eight years for the death of his 21-month-old daughter after failing to report abuse the judge called horrific and noticeable.

Manitoba Man Sentenced To Eight Years In 'Horrific' Death Of His Young Daughter