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While inflation has come off its peak, it remains too high. As the economy responds to higher interest rates and as the effects of elevated commodity prices and supply disruptions fade, the Bank expects inflation to fall to about 3% in late 2023, then return to 2% in 2024.

Senior Deputy Governor Carolyn A. Wilkins reviews key themes discussed by participants at the workshop “Monetary Policy Framework Issues: Toward the 2021 Inflation-Target Renewal”.

The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties.

The authors review the eight largest public pension funds in Canada. These funds are an important source of retirement income for Canadians. They are also significant investors, with net assets under management of over $1 trillion. The authors outline the investment strategies of the funds and how they interact with financial institutions and participate in financial markets. They also discuss the ways in which the funds’ risk-management frameworks could contribute to financial system stability and how they minimize potential vulnerabilities.

As the ultimate provider of Canadian-dollar liquidity to the financial system, the Bank of Canada has the unique capacity to create Canadian-dollar claims on the central bank and the power to make secured loans or advances to chartered banks and other members of the Canadian Payments Association. The Bank supplies overnight credit on a routine basis through the Standing Liquidity Facility (SLF) to direct participants in the Large Value Transfer System, and Emergency Lending Assistance (ELA) to solvent deposit-taking institutions that require more substantial and prolonged credit. The authors review the policy framework that guides the Bank's lender-of-last-resort function, including the key issues, terms and conditions, and eligibility criteria associated with its SLF and ELA activities. Also discussed are foreign currency ELA, the relationship between SLF and ELA, systemic risk and Bank of Canada intervention, and the potential provision of liquidity to major clearing and settlement systems.

The increasing importance of risk management in payment systems has led to the development of an array of sophisticated tools designed to mitigate tail risk in these systems. In this paper, we use extreme value theory methods to quantify the level of tail risk in the Canadian retail payment system (ACSS) for the period from 2002 to 2015.

In an educational session on e-money to the Senate of Canada’s Standing Committee on Banking, Trade and Commerce. Grahame Johnson and Lukasz Pomorski highlight recent innovations in Canada’s payments system and the economic needs that these innovations satisfy.

Governor Mark Carney discusses current financial system reform initiatives in a speech to the Institute of International Finance.

We use the Terms-of-Trade Economic Model (ToTEM) to conduct demand- and supply-driven simulations, both of which deliver weakness in Canadian non-commodity exports relative to foreign activity in line with recent data.