The alternative policies for monetary policy framework being reviewed include average-inflation targeting; price-level targeting; an employment-inflation dual mandate; nominal GDP growth and level targeting, Bank of Canada (BoC) senior deputy governor Carolyn Wilkins said.
Additional takeaways
"Central bank's review of alternative monetary policy options has identified some strengths and weaknesses of different frameworks; so far no single framework dominates on all margins."
"Current economic crisis has made it crystal clear that central banks are likely to run out of conventional firepower if we see an economic downturn in a low-interest-rate world."
"Economic environment has also made it clear that long periods of low interest rates encourage investors to take on the risk that may be excessive; cites high levels of indebtedness in Canada and around the world."
"Bank is also considering raising the current 2% inflation target as part of its review."
"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; the central bank should take these issues into account but the focus must be on macroeconomy to support sustainable growth and price stability."
Market reaction
The USD/CAD pair edged slightly lower in the last minutes and was last seen trading flat on the day at 1.3170.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD stays below 1.2450 after UK employment data
GBP/USD trades marginally lower on the day below 1.2450 in the early European session on Tuesday. The data from the UK showed that the ILO Unemployment Rate in February rose to 4.2% from 4%, weighing on Pound Sterling.
EUR/USD steadies above 1.0600, awaits German ZEW and Powell speech
EUR/USD is holding above 1.0600 in the European morning on Tuesday, having hit fresh five-month lows. The pair draws support from sluggish US Treasury bond yields but the rebound appears capped amid a stronger US Dollar and risk-aversion. Germany's ZEW survey and Powell awaited.
Gold price holds steady below $2,400 mark, bullish potential seems intact
Gold price oscillates in a narrow band on Tuesday and remains close to the all-time peak. The worsening Middle East crisis weighs on investors’ sentiment and benefits the metal. Reduced Fed rate cut bets lift the USD to a fresh YTD top and cap gains for the XAU/USD.
SOL primed for a breakout as it completes a rounding bottom pattern
Solana price has conformed to the broader market crash, following in the steps of Bitcoin price that remains in the red below the $65,000 threshold. For SOL, however, the sensational altcoin could have a big move in store.
Key economic and earnings releases to watch
The market’s focus may be on geopolitical issues at the start of this week, but there is a large amount of economic data and more earnings releases to digest in the coming days.