Global engagement in action

The Bank of Canada’s international activities help it achieve its mandate. Exchanging information with international counterparts helps the Bank better understand developments in the global economy. This is important for:

• setting monetary policy
• identifying risks to the Canadian and global financial systems

Working with international counterparts also builds relationships that are needed during a crisis. In addition, collectively addressing policy challenges supports the economic and financial well-being of Canadians.

• Many of the most important challenges facing Canada are best tackled in cooperation with other countries.
• The Bank can help ensure that Canada’s perspective and priorities are reflected in efforts to resolve challenges and improve the global economic and financial system.

Focusing on the issues that matter

The Bank’s work with its international partners took on heightened significance in a year characterized by high inflation around the world and geopolitical conflict.

Exchanging information to combat high inflation

Governor Macklem and other central bank governors met regularly to share their experiences and views on inflation and financial stability. They met through such bodies as:

• the Bank for International Settlements
• the Financial Stability Board
• the International Monetary Fund (IMF)
• the G7
• the G20

In April and October, the Governor exchanged information with his G20, G7 and IMF counterparts during the IMF meetings in Washington. He spoke with journalists after each of these meetings about the insights he gained.

The April discussions reaffirmed that high inflation would take longer than expected to decline—largely due to the pervasiveness of global supply chain disruptions and the war in Ukraine. The Governor and his G20 counterparts communicated a shared commitment to restore price stability. The Governor also said that the Bank would be as forceful as needed to bring inflation back to the 2% target.

By the October meetings, interest rates around the world had risen rapidly. The Governor and his central bank counterparts were highly aware that the pace and extent of these increases could have unintended effects in the global financial system. They agreed on the need to closely watch markets for signs of acute stresses while keeping a laser focus on controlling inflation.

Leveraging international networks during a crisis

The Bank’s discussions with the G7 ramped up after Russia’s invasion of Ukraine. G7 governments responded in solidarity to the war by:

• providing financial support to Ukraine
• imposing sanctions on Russia

G7 central banks supported finance ministries by:

• providing technical expertise about payment systems
• monitoring the effects of the sanctions
• continuing to help protect G7 financial sectors from cyber threats as part of the ongoing work of the G7 Cyber Experts Group1

Working with its G7 counterparts also helped the Bank assess the implications of the war for its own economic outlook. This provided valuable insights during a period of high uncertainty. The Bank contributed its perspective to the discussions as a country that is a large producer of energy and other commodities.

Addressing policy challenges that matter for Canada

Throughout 2022, the Bank took advantage of its research, innovative ideas and collaborative relationships to influence the direction of international discussions on:

• assessments of current and future global risks from the perspective of a small open economy (particularly risks from high inflation)
• steps to strengthen the international monetary and financial system so that it better serves Canada and the world
• equipping the global financial system to support a smooth transition to net-zero carbon emissions for all sectors
• gaining a better understanding of the macroeconomic effects of climate change
• developing coherent international policy frameworks for digital assets and payments that serve Canada well, including for the potential issuance of a central bank digital currency

The Bank kept working with its G7 counterparts to better understand how the increased digitalization of the economy affects growth and inflation. Work on promoting diverse and inclusive G7 central banks also continued.

These areas will remain a priority in 2023.