Bank of Canada's Carolyn Wilkins speaking
- review of alternative monetary policy options has identified some strengths and weaknesses of different frameworks
- so far no single framework dominates on all margins
- economic crisis has made it crystal clear that central banks are likely to run out of conventional firepower in a another economic downturn given the low interest rate environment
- economic environment has also made it clear that long periods of low interest rates encourage investors to take on a risk that may be excessive: sites high levels of indebtedness
- alternative policies for monetary policy framework being reviewed including average inflation targeting, price level targeting, and employment - inflation and dual mandate, nominal GDP growth and level targeting
- Bank has also considered raising current 2% inflation target as part of its review
- banks review considering more novel criteria like how each framework impacts the distribution of income and wealth as well as how robust the frameworks are in good and bad economic times
- existing 2% inflation goal is a clear target, it's simple to see if the central bank has done its job or not
- current monetary policy framework is also flexible in terms of how fast the bank can aim to return inflation to target
- seeing unconventional monetary policy tools in action during Covid – 19 has put renewed focus on how these tools are impacting both asset prices and decisions on borrowing and lending
- monetary policy is ill-equipped to deal with sector specific issues. Central bank should take these issues into account but focused must be on macroeconomy to support sustainable growth and price stability
Lots of options to mull regarding a new inflation framework, but no firm decision. Just a number of ideas.
The USDCAD remains above its low for the day at 1.31585. The price currently trades at 1.3170. The low for the day correspond with the low from last Friday. Below that sits the low from last week at 1.31324 (from August 19), and the low from Monday at 1.3134
