In his prepared speech to be delivered at an event in Ottawa, Bank of Canada's deputy governor Lawrence Schembri said that flexible exchange rate was a key reason for success in targeting inflation and added that it will remain as an important part of the monetary policy framework. Schembri didn't touch on the policy or the economic outlook in his speech. Below are some key takeaways, via Reuters.
- Had bank raised interest rates after oil price shock to support C$, 900k fewer jobs would have been created.
- As part of the monetary policy framework review, flexible exchange rate won't be altered, but 2% inflation target is being reviewed.
- Canada's experience indicates having a market-determined exchange rate, especially with an inflation target, fosters financial development.
- Floating currency does not completely offset the impact of all external shocks, primarily changes in commodity prices.
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