The Bank of Canada Economics 120

Bank of Canada  The Bank of Canada is the nation’s central bank.  The headquarters are located in Ottawa, Ontario.  It is a Crown corporation and the Minister of Finance holds the entire share capital issued by the Bank.

Bank of Canada  Its clientele include: the federal government other central banks commercial banks certain other financial institutions.  The Bank of Canada provides the government with economic advice and lends it money on occasion.

Bank of Canada  The head of the Bank of Canada is the Governor, who is appointed by the bank's board of directors.  The governor is appointed for a seven-year term, and cannot be dismissed by the government.  The current governor is Mark Carney. His term began in February 2008.

Bank of Canada  The bank's current mission statement is: The Bank of Canada's responsibilities focus on the goals of low and stable inflation, a safe and secure currency, financial stability, and the efficient management of government funds and public debt.

Responsibilities  monetary policy - concerned with how much money circulates in the economy, and what that money is worth  bank notes – responsible for designing, producing, and distributing Canada's bank notes

Responsibilities  financial system - Canada's financial system consists of financial institutions, such as banks and credit unions; the financial markets; and payments systems  fund management - provides high-quality, effective, and efficient funds- management services for the federal government, the Bank, and other clients

Monetary Policy  The cornerstone of the Bank's monetary policy framework is its inflation-control system, the goal of which is to keep inflation near 2 per cent — the mid-point of a 1 to 3 per cent target range.

Monetary Policy  When demand is strong, it can push the economy against the limits of its capacity to produce.  Strong demand tends to raise inflation above the midpoint, so the Bank will raise interest rates to cool off the economy.  When demand is weak, inflationary pressures are likely to ease. The Bank will then lower interest rates to stimulate the economy.

Monetary Policy  The Bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate. The "overnight rate" is the interest rate at which major financial institutions borrow and lend one-day (or overnight) funds among themselves.

Monetary Policy  In November 2000, the Bank introduced a system of eight "fixed" dates each year on which it announces whether or not it will change the target for the overnight rate.

Website  canada.ca/en/index.html canada.ca/en/index.html