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Sound financial investment is important to individuals, to firms, and to society as a whole. By definition, investment is forward looking, and thus our future financial well-being is shaped by the soundness of the investment decisions we make today.

Canada’s economy faces two significant shocks—the plunge in global oil prices and the impact of the COVID-19 pandemic.

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

Effective 1 November 2003, the Bank of Canada abandoned its practice of backdating the results of settlement of payments through the Automated Clearing Settlement System (ACSS). It has adopted instead a system of "next-day" settlement under which the results of the settlement process will appear on the central bank's books on the day the items actually settle in the ACSS. Since July 1986, settlement of these items had occurred at noon the day after items were presented for clearing, but the results were recognized on the Bank's books the previous day, through backdating, or "retroactive" settlement. The new system should simplify the payments process and improve the reporting of settlement risk, as well as promote cost-effectiveness within the payments systems. ACSS participants have agreed among themselves to implement an interest-compensation mechanism in order to avoid imposing a float charge on their customer base.

Six months ago, at the time of the last Monetary Policy Report, the global economic and financial environment was volatile and highly uncertain because of the adverse situation in Asia and the fallout from the Russian debt moratorium.

The two key components of the Bank's monetary policy framework are an "anchor," the inflation target, and a "float," the flexible exchange rate. Living by the ocean, you know better than I that a good mooring is one that keeps a boat in place, yet allows some give and take for the wind and the tide.

Thank you for inviting me here today. It is a pleasure to be with you. This afternoon, I would like to talk about liquidity and the role of the Bank of Canada.

The adjustment to higher interest rates is exposing vulnerabilities in the global financial system. Recent banking sector stresses serve as a reminder that risks can arise and spread quickly. Key areas of concern are bank funding, liquidity in fixed income markets, and households’ ability to service their debts. Other financial system concerns relate to cyber attacks, climate change and cryptoasset markets.

Over the past year, both private sector financial market participants and public sector authorities have been preoccupied with the topic of liquidity as never before. Throughout the financial market turbulence, private liquidity management has become tremendously important.