Alternative policies for the monetary policy framework under consideration include targeting average inflation; price targeting; a dual mandate of employment and inflation; nominal GDP growth and targeting level, said Bank of Canada (BoC) Senior Vice Governor Carolyn Wilkins.
The central bank’s review of alternative monetary policy options identified some strengths and weaknesses of different frameworks; so far, no one framework dominates on all the margins.
“The current economic crisis has made it clear that central banks risk running out of conventional firepower if we see an economic slowdown in a world of low interest rates.”
“The economic environment has also made it clear that long periods of low interest rates encourage investors to take risk which may be excessive; cites high debt levels in Canada and around the world.”
“The Bank is also considering raising the current inflation target to 2% as part of its review.”
“Review taking into account newer criteria such as how each executive affects the distribution of income and wealth as well as the strength of executives in good and bad economic times.
“The current 2% inflation target is a clear target; it’s easy to see whether the central bank has done its job or not.”
“The current monetary policy framework is also flexible in terms of how quickly the bank can aim to bring inflation back to its target.”
“Seeing unconventional monetary policy tools in action during COVID-19 has re-emphasized the impact of these tools on asset prices and borrowing and lending decisions.
“Monetary policy is ill-equipped to deal with sector-specific issues; the central bank should take these issues into account, but the focus must be on macroeconomics to support sustainable growth and price stability.”
USD / CAD fell slightly in the last few minutes and was last seen flat on the day at 1.3170.