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This article outlines one of the Bank's key approaches to dealing with the uncertainty that surrounds decisions on monetary policy: the consideration of a wide range of information from a variety of sources. More specifically, it describes the information and analysis that the monetary policy decision-makers—the Governing Council of the Bank of Canada—receive in the two or three weeks leading up to a decision on the setting of the policy rate—the target overnight interest rate. The article also describes how the Governing Council reaches this decision.

The Bank of Canada is using an enhanced dataset that tracks the stock of outstanding mortgages and home equity lines of credit held by federally regulated lenders. This paper highlights some of the new details in the dataset and how they impact the Bank’s understanding of the mortgage market.

Nonresponse is a considerable challenge in the Retailer Survey on the Cost of Payment Methods conducted by the Bank of Canada in 2015. There are two types of nonresponse in this survey: unit nonresponse, in which a business does not reply to the entire survey, and item nonresponse, in which a business does not respond to particular questions within the survey.

This article compares different measures of real short-term interest rates for Canada over the period from 1956 to 1995. A new measure for the expected real interest rate is constructed using a proxy for inflation expectations that is based on the properties of past inflation. The history of inflation in Canada suggests that the characteristics of inflation have changed considerably over time. Past inflation can be characterized by three different types of behaviour: an environment in which average inflation is low and shocks to inflation have only temporary effects; an environment of moderate inflation with more persistent disturbances; and an environment of drifting inflation in which shocks have permanent effects on the level of inflation. The proxy for inflation expectations uses a statistical model, called a Markov Switching Model, to take account of changes in the behaviour of inflation over time. It is found that uncertainty about the changing characteristics of inflation behaviour leads to uncertainty about estimates of inflation expectations and thus about measures of real interest rates. Target ranges for keeping inflation low should help reduce the uncertainty about inflation behaviour. The behaviour of inflation and interest rates suggests that the credibility of the Bank of Canada's inflation-control objectives is growing. This should reduce inflation uncertainty and lead to lower nominal interest rates over time.

The Bank projects that Canadian economy will grow by 1.5 percent this year, 1.7 percent in 2020 and 1.8 percent in 2021.

Real GDP in Canada is expected to grow by 2.0 per cent in 2018, 2.2 per cent in 2019 and 1.9 per cent in 2020.

Since 1995, acquisitions of foreign firms by Canadian residents and acquisitions of Canadian firms by foreign residents have increased. Through most of this period, the dollar has depreciated, but the cumulative net balance of foreign direct investment acquisition flows has remained close to zero. The recent upward trend in bilateral acquisition flows is part of the globalization process as firms consolidate and rationalize their operations, and is not related to the value of the Canadian dollar. Standard models of international asset pricing imply that there should not be a relationship between the Canadian exchange rate and foreign takeovers of Canadian firms because an exchange rate movement does not give foreign buyers a systematic advantage over domestic buyers. Purchases of domestic firms by foreign residents are likely to be welfare-improving. Transactions between foreign and domestic residents are voluntary, and they imply that the foreign buyers expect to obtain higher profits from the firms' assets.

Overview The purpose of the consultations is to obtain market views on issues relating to the design and operation of government debt programs over 2001—02, with a focus on the Treasury bill program. The following provides a brief description of the issues to be covered: Context The objectives of debt strategy are to provide stable, […]

Quarterly Financial Report - Second Quarter 2020 - For the period ended June 30, 2020