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Governor Mark Carney discusses the key elements of Canada’s inflation-targeting regime.

Deputy Governor Lawrence Schembri discusses pension funds and financial stability.

Information technology (IT) is an increasingly integral part of everyday business and personal life reflecting the ongoing and accelerating digital transformation of the economy. In this paper, we present information gathered from a survey with export-oriented firms in the Canadian IT service industry and consultations with industry associations aimed at shedding light on this small but highly dynamic sector.

We study how the interaction of market power and nominal price rigidity influences inflation dynamics. We find that pass-through declines with price stickiness when markets are concentrated, which implies a lower slope of the New Keynesian Phillips curve.

Product standards are omnipresent in industrialized societies. Though standardization can be beneficial for domestic producers, divergent product standards have been categorized as a major obstacle to international trade. This paper quantifies the effect of standard harmonization on trade flows and characterizes the extent to which it changes the cost and demand structure of exporting.

In this note, we present the Commodities Factor Model (CFM), a dynamic factor model for a large cross-section of energy and non-energy commodity prices. The model decomposes price changes in commodities into a common “global” component, a “block” component confined to subgroups of economically related commodities and an idiosyncratic price shock component.

The authors present a detailed discussion of the Bank of Canada's framework for the implementation of monetary policy. As background, they provide a brief overview of the financial system in Canada, including a discussion of the financial services industry and the money market.

This overview includes a brief history highlighting the government's use of the primary and secondary markets to develop a framework for distributing its debt securities to financial market intermediaries and end investors. The framework is also intended to meet the government's debt-strategy objectives of raising stable, low-cost funding and maintaining a well-functioning debt market. Pellerin reviews the government's adoption of a new framework in 1998 as well as the 2005 modifications aimed at attracting continued broad and competitive participation in government auctions.

This survey took place between April 28 and May 13, 2022. Follow-up interviews took place in June. Consumers’ expectations for inflation have risen, alongside concerns about prices for food, gas and rent. Short-term expectations are at record-high levels. Long-term inflation expectations increased significantly in the second quarter of 2022, returning to the levels they were at before the COVID-19 pandemic. Most people believe the Bank of Canada can achieve its inflation target. However, some think the process of bringing inflation down will be difficult for the Bank of Canada. Expectations for higher inflation and rising interest rates weigh on consumer confidence. People expect that credit conditions will worsen and wage growth will not keep up with inflation. Flexible work arrangements could attract more people into the labour force.

We examine systemic risks within the Canadian banking sector, decomposing them into three contribution channels: contagion, common exposures, and idiosyncratic risk. Through a structural model, we dissect how interbank relationships and market conditions contribute to systemic risk, providing new insights for financial stability.